Employee theft initially brings to mind the embezzlement of company funds, stealing time, theft of inventory and the pocketing of office supplies. What many employers and entrepreneurs don't realize is that there is a much more lucrative type of theft -- theft of information or proprietary data. Theft of information is the use of company knowledge for the personal enrichment of the employee. Personal enrichment may be the use of your business information for the establishment of his own business or for gaining employment with one of your competitors. Proprietary data is information owned by the business. Information ripe for theft includes your client lists, sales information, route lists and methods of production. Examples of theft of information include:

• a salesman gaining employment with a company distributing a similar product as his previous employer while using a list of his former customers to bring in business for his new employer - and away from the old employer;

• a company manager approaching company clients about giving their business to the manager if he were to start a new and similar company, then leaving the company, taking a large block of clients with him;

• an employee using a company's 'secret formula' or manufacturing process to create his own, competing product.

There are ways you can protect your business from such theft, such as confidentiality agreements, company manuals and non-compete agreements. A confidentiality agreement is a contract between the employee and the employer in which the employee agrees not to make us of, or pass on to third parties, knowledge or information (such as client lists, trade secrets and methods of production) gained during his employment with the company. A company manual sets forth the policies of the company that the employee must abide by. Although the company manual is not necessarily a contract between the employee and the company, it is a means to provide each employee with a clear understanding of where the company stands on such issues as employee access to and use of information. Employee manuals are considered contracts in some states under certain circumstances, so you must be very careful in how they are worded. A non-compete agreement is a contract between the company and an employee or between partners in which the employee or partner agrees not to engage in any business similar to that of the company or to solicit customers of the company for a specified period of time and within a specified geographic area.

Although very effective, contracts and agreements are not 100% foolproof. Unfortunately, people do violate agreements everyday, contracts are breached and company rules are broken. And such agreements must be carefully written in order to hold up in court. So, as a further avenue of relief, Louisiana has another means of protecting employers and business owners who face just these types of situations.

The Louisiana Unfair Trade Practices Act, created in 1972, was designed to protect both consumers and businesses from unfair methods of competition, amongst other things, and has been broadened significantly to include a way to prevent others from using a previous employer's information or proprietary data to compete directly with it and/or to compensate a business for losses it may experience as the result of unfair competition and illegal use of its proprietary information.

Although employers have recourse under the law, the state does want to encourage competition amongst businesses, so there is a test that is applied to determine whether or not you might successfully pursue an employee or ex-employee for breach of the Unfair Trade Practices Act. The courts find a practice unfair when (1) the practice offends established public policy and (2) the practice is unethical, oppressive, unscrupulous, or substantially injurious to any person including business consumers or competitors. In many situations where an employee has been deceptive, breached his fiduciary (trust) duty to his employer, or acted unethically, the case can pass this legal test.

Other applications of the Louisiana Unfair Trade Practices Act include the use of information gained by one company during the attempted sale/acquisition of another such as through the exchange of financial information, client lists and sample contracts.

The Louisiana Unfair Trade Practices Act protects businesses by giving them the chance to stop unfair competition, by both former employees and other business entities, and recover for damage done to the business by the unfair practices of others.

In order to benefit from the Louisiana Unfair Trade Practices Act a company must engage in litigation with the offending party. Unfortunately, litigation can be an expensive remedy. A company is better advised to use confidentiality agreements, non-compete agreements and the implementation of employee manuals as its first course of action, while depending on the Louisiana Unfair Trade Practices Act as a safety net.

If you have any questions about confidentiality agreements, non-compete agreements, company manuals or the Louisiana Unfair Trade Practices Act and how it can protect your business, please contact our office at attygoldman@mindspring.com, (504) 837-1205 or toll free at 1-877-225-4LAW (4529).