The Latest On What's Happening With The Chamber & Our Members


Cook Medical’s Flourish™ receives authorization for pediatric esophageal atresia

Cook Medical announced today that the U.S. Food and Drug Administration (FDA) has granted the Flourish™ Pediatric Esophageal Atresia device authorization under the Humanitarian Device Exemption (HDE) for the treatment of pediatric esophageal atresia.

Esophageal atresia is a birth defect of the esophagus, the tubular structure connecting the mouth to the stomach, in which the upper portion of the esophagus does not connect to the lower portion of the esophagus and stomach. Surgery has traditionally been the only treatment option to repair the malformation until Dr. Mario Zaritzky, a pediatric radiologist at the University of Chicago Medical Center, and Cook collaborated on the development of a minimally invasive, magnet-based approach.

The Flourish Pediatric Esophageal Atresia device uses rare earth magnets that are inserted into the upper and lower ends of the infant’s esophagus. Over the course of several days, the magnets gradually stretch both ends of the esophagus, after which the tissue connects to form an intact esophagus. To date, 16 patients have been successfully treated with this device.

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Employment Law In Focus – May 2017

Nine Traits of a Bang-Up Investigation

What makes a workplace investigation so good that you can’t wait to show the EEOC investigator or a plaintiff’s attorney what you did?  All right, maybe nothing would make it that good – but here are nine things employers can do to help ensure that they at least won’t be ashamed of their workplace investigations:

No. 1:  The investigator is unbiased.  And ideally doesn’t have extensive, intimate knowledge about all of the personalities involved. An investigator who knows too much may have a hard time keeping an open mind. That’s one reason why larger companies often send in someone from the corporate office to investigate. Smaller companies may find it more difficult to find an investigator with that blissful ignorance. But they can consider bringing in someone from outside, like a lawyer or an HR consultant. If that isn’t possible, then the investigator will just have to temporarily put aside what he knows, to the best of his ability, while the investigation takes place.

No. 2:  The investigator doesn’t have a “conflict of interest.” In this context, that means the investigator has authority over everyone involved in the alleged incident, including the authority to take appropriate action against whomever is determined to be the wrongdoer. She should be in a position to “let the chips fall” and to recommend corrective action without having to fear retaliation.

No. 3:  The investigator knows how to conduct a workplace investigation. Oh, the horror stories we’ve seen! Here’s one: Employee accuses supervisor of sexual harassment. “Investigator” asks supervisor whether he did it. Supervisor says no. OK! Case closed! If your investigator is inexperienced, have him read points 4-9 below – or attend a seminar. You won’t regret it.

No. 4:  The investigator talks to everybody who might know something. This would obviously include the accuser and the accused. But it also includes any witness identified by the accuser or the accused. It also includes any witness identified by the witnesses. And any witnesses identified by the witnesses’ witnesses. Yes, this could go on for some time.  But you don’t ever want to be accused of failing to follow all possible leads that might reasonably generate relevant information. And if during the process you get an admission or other conclusive evidence, then you may be able to stop before having to talk with everyone.

No. 5: The investigator knows the difference between a “fact” and a “conclusion,” and knows that “facts” are better. Which of these tells you what you need to know? (1) “Joey is a sleazebag” (a conclusion), or (2) “Joey grabbed Mary on Friday, and I saw him do it” (a fact — or, at least, a specific factual allegation)?

No. 6:  The investigator knows to review other evidence as applicable. This could include things like personnel records, work schedules, financial records, security camera footage, voice mail messages, and emails and other IT information. And much more, depending on the circumstances. The investigator should not be afraid to ask for help from a qualified expert (such as an IT professional) when she needs it.

No. 7:  The investigator frequently refers to the applicable company policy while conducting the investigation to make sure he is following it.  Plaintiffs’ attorneys love to get copies of employer policies, and then point out all the ways the employer didn’t follow them. (Often referred to as “shooting fish in a barrel.”) For this reason, if no other, whoever conducts a workplace investigation should frequently refer to any applicable policy as an investigation “checklist” of sorts – and especially if the policy itself is on conducting investigations.

No. 8:  The investigator maintains confidentiality as much as practicable.  Perfect confidentiality is not possible — otherwise, how would it be possible to investigate anything? But the investigator can refrain from sharing information with those who do not have a legitimate need to know. And witnesses should also be cautioned to keep the investigation confidential, identifying only the investigator or certain designated management officials for contacting in the future if the witness thinks of any additional information.  (Note: Our National Labor Relations Board has been challenging certain “confidential” designations like this – but we’ll see if that continues under the current administration.)

No. 9:  The investigator consults with others as needed during the course of the investigation and in determining what happened. This may include legal counsel, but it might also include other experienced Human Resources personnel, the employee’s manager and supervisor, “experts,” and others, depending on the nature of the investigation.

This article was written by Robin E. Shea of Constangy, Brooks, Smith & Prophete, LLP

K&W Cafeterias Salute to Business Luncheon – Wednesday, April 26, 2017

Grady T. Allred, Sr., started to work at The Carolinian Coffee Shop in downtown Winston-Salem in 1935. Around 1937, the original investors (T.K. Knight and his brothers-in-law, Thomas, Kenneth and William Wilson) decided to change the coffee shop’s name. Using their initials, they created the name K&W Restaurant. In 1941, Allred became K&W’s sole owner after acquiring the last remaining share from Thomas Wilson. A second K&W location opened in nearby High Point. Both restaurants flourished until December of 1951, when a fire forced the downtown Winston-Salem location to close for several months. After extensive repairs and restoration, the restaurant reopened in 1952 with a slight twist – it was now a restaurant/cafeteria combination. Eventually, the cafeteria style service became so popular, Allred converted his High Point and Winston-Salem locations entirely to cafeterias. Hence, K&W Cafeteria was born.

K&W is celebrating the 80th anniversary and remains a family owned and operated business. The strong family foundation established by Grady Allred, Sr. still lives in the hearts of his descendants. Our passion for K&W, our love of one another, and the livelihood of the over 2,300 individuals that we employ is a testament to the foresight and vision of our great-grandfather.

K&W Cafeterias is headquartered in Winston-Salem, N.C., and now has 33 locations: 23 in North Carolina, 5 in South Carolina, 4 in Virginia, and 1 in West Virginia.

Front Row (left to right):

Tamara Melvin, Digital Marketing Director – K&W Cafeterias
Terry Barber, Director of Catering and Event Planning – Twin City Quarter
Rob Cox, Regional Vice President – K&W Cafeterias
Julie Long, Project Coordinator / Customer Service Director – K&W Cafeterias

Second Row (left to right):

Gayle Anderson, President & CEO – Winston-Salem Chamber of Commerce
Adriane Griffith, Student – Glenn High School
Vivian Le, Student – Glenn High School

Third Row (left to right):

Rodessa Mitchell, Vice President, Education & Workforce Development – Winston-Salem Chamber of Commerce
Jill Atherton, Vice President, Economic & Community Development – Winston-Salem Chamber of Commerce
Dan Joyner, President – Image360

Violations, Rezoning and Getting your Project Started: What Winston-Salem Businesses Need to Know

U.S. Supreme Court Justice Thurgood Marshall noted that zoning may be “the most essential function performed by local government, for it is one of the primary means by which we protect that sometimes difficult to define concept of quality of life.”

Every piece of property in Winston-Salem and Forsyth County is “protected” by zoning. Your business, your home, your place of worship. Every place.

Businesses, residents, elected officials and civil servants may legitimately pay attention to, and sometimes control, what’s going on next door, down the street and in your community. Business and citizens may not know all the rules, but know that there shouldn’t be a skyscraper on the property line (except maybe downtown), a salvage yard in a residential zone, or an adult use next to an elementary school. Proper zoning may improve quality of life and property values. 

At the same time, the bad news is that neighbors and officials have a legitimate interest in others’ property and we may be “protected” from doing things on our own property, which, we may think, don’t hurt a soul. That fine, new accessory structure, for example, may be a foot too close to your neighbor, 6-inches too tall, in a flood plain, or intended for purposes legal only in a different zone. And your new, fancy, flashing sign guaranteed to bring in customers?  Well, you didn’t get a permit, it’s too large and it can’t change messages except every so often.

Complaint-driven Violations

While potential violations may be caught in the planning stage—did you know that every property should have a zoning permit?—zoning enforcement in Winston-Salem and Forsyth County is mostly complaint-driven. Inspectors do not drive around looking for potential violations—there are only four inspectors to cover nearly the entire county. However, when they receive a complaint, anonymously or otherwise, they are obligated to investigate and enforce a weighty volume titled the “Winston-Salem/Forsyth County Unified Development Ordinances” (UDO). Other local municipalities have similar ordinances. The UDO describes 16 different residential zoning districts, 13 commercial districts, 3 industrial districts, 3 institutional and mixed used districts, and 7 assorted overlay and special purpose zoning districts (historic, conservation, airport, etc.). Most of these districts may also be “special” or “limited” use districts. Certain uses further require a quasi-judicial (under oath) hearing.

The UDO is technical and subject to interpretation, and such interpretations can be appealed. The goal is usually compliance, not punishment. Sometimes compliance takes time, and if the alleged violator cooperates in good faith, a grace period will often be allowed before more serious enforcement ensues.

Of course it’s irritating, and potentially expensive, to be the subject of an anonymous complaint about something you may consider trivial. It’s not unheard of for zoning enforcement to be called as the result of a business or personal feud or by an elected official who has heard from a constituent or who just doesn’t appreciate what you are doing.

In one anonymous complaint matter I handled, staff was very helpful and ultimately concluded that there was no zoning violation. But the process was time-consuming and burdensome. What does not work in reacting to a violation notice is to point out all the other properties doing the same thing … “why don’t you go after them?” Inspectors will investigate others if you register a complaint, but that generally doesn’t improve your own situation.       

Rezoning

Businesses and citizens more frequently get involved in filing for or opposing a rezoning. What is a good citizen or corporate pillar to do when faced with a contentious land use issue?  

The first thing is to know where to find the rules and plans, get at least a general idea of how they apply to the property in question and ask staff (or your attorney) for an initial interpretation.

The Winston-Salem-Forsyth County Planning Board’s official comprehensive plan, required by state law is called the 2001 Legacy Plan; the most recently updated version is Legacy 2030. Area Plans, adopted by city council or county commissioners after planning outreach and citizen input, cover smaller areas—they do not change zoning but serve as a guide for zoning and planning decisions, offering some predictability to developers and neighborhoods. 

Despite best efforts by Planning staff, input on big picture planning—meaning comprehensive and area plans—is often provided primarily by the same interested parties. Concerned citizens and small businesses may not have the time and may not discover what’s in an area plan until the adopted plan proves an obstacle or promotes a proposal they don’t like. Participants in a visioning/planning process often have wonderful ideas, but those ideas may not be practical and can, for example, recommend community uses for other’s private property (“that large commercial/industrial property could make a nice park”). It’s best to participate in the Area Plan process from the beginning.

A potentially contentious rezoning should be preceded by neighborhood outreach, including a neighborhood meeting. This may soon be required in Winston-Salem. Even if not required, the first question an applicant may get from even a quasi-judicial board is, have you met with the neighbors? The application may be stopped cold if the answer is “no.”

Get Your Project Started off Right

Meet with the neighbors, or at least neighborhood leaders, before rumors start circulating. Once the wrong idea gets out, it’s hard to change hearts and minds. Most zoning decisions are legislative, meaning that elected officials have wide leeway on how they can vote and appeal paths are limited. Even if a zoning project is supported by Legacy, the Area Plan, planning staff and the Planning Board, it can be hard for elected or appointed bodies to vote against strong opposition.

If you are the developer, meet early with elected officials. It’s important to make the effort and advise them of the project. The first thing they hear about a project should not be from a concerned neighbor. Explain the benefits, including tax and job growth, and ask for their thoughts.  

Before one of my first zoning hearings, I was dressed down, in front of my client, by an elected official for failing to make contact in a timely fashion. Properly chastened, all was sweetness and light at the public hearing, but it’s a lesson to remember.

There are usually at least a few items on which neighbors and developers can compromise: setbacks, bufferyards, lighting, entrances, exits, etc. And sometimes settlement is preferable to eliminate potential surprises. I once settled a case right before the hearing and the rezoning passed without objection. Walking out with the lead opponent, I learned that, if the case had not settled, we both thought a particular board member was going to vote our way.

Finally, zoning and land use ordinances vary widely across North Carolina. Some are strict, while some counties have no zoning at all but nevertheless have development requirements and restrictions. It’s to your benefit to engage staff and learn the local ordinances, generally available online or through visiting the planning office, as early in the process as possible.

 

Meet the Author
Donald M. Nielsen is an attorney at the Winston-Salem law firm of Bell, Davis & Pitt, P.A. His primary areas of practice are environmental law, zoning, and local government and administrative law. Don has served as chairman of the Historic Resources Commission, a member of the Forsyth County Environmental Affairs Board, president of the Forsyth County Genealogical Society and president of his Kiwanis Club.

Winston-Salem State receives $30K Retool Your School grant

Winston-Salem State University (WSSU) has received a $30,000 campus beautification grant through Home Depot’s Retool Your School program. The grant will support improvements to the historic lawn between Blair and Carolina halls.

WSSU qualified for the grant by receiving more than 100,000 online votes and social media posts during a month-long contest that closed on April 16. The initiative was led by WSSU’s Students Government Association.

The grant will pay for the materials to build a gazebo around the historic bell, which dates to 1900, as well as new park benches and landscape enhancements. According to the proposal, the improvements will create a new quiet space for students while honoring the university’s unique history. The gazebo will also help to protect the bell, which dates back to when WSSU was Slater Industrial and State Normal School.

In April, SGA launched a Zen Zone in the area that will include hammocks. Students also will be able to check out, using their RAMCards, yoga mats and picnic blankets. This will create a green place where students could relax and “be free of cultural norms and judgement,” according to SGA President Mona Zahir.

WSSU was announced as a winner at a celebration at the Home Depot headquarters in Atlanta on Wednesday, May 10.

The proposal was developed by students from WSSU’s SGA in collaboration with WSSU’s Facilities Design and Construction. As part of the effort, which is being coordinated by WSSU’s Special Projects Unit, the bell will be restored with a weather-resistant coating. WSSU is celebrating its 125th anniversary this year.

The Home Depot Retool Your School Grant Program, established in 2010, encourages and recognizes innovative projects that contribute to the campuses of accredited Historically Black Colleges and Universities (HBCUs). Since the program’s inception, over $1.5 million in grant money has been awarded to our nation’s HBCUs to make sustainable improvements.

WSSU is the only North Carolina HBCU to win the grant this year.

A bold past. A brilliant future.
For 125 years, Winston-Salem State University has fostered the creative thinking, analytical problem-solving, and depth of character needed to transform the world. Rooted in liberal education, WSSU’s curriculum prepares students to be thought leaders who have the skills and knowledge needed to develop innovative solutions to complex problems. WSSU is a historically Black constituent institution of the University of North Carolina with a rich tradition of contributing to the social, cultural, intellectual, and economic growth of North Carolina, the region and beyond. Guided by the motto, “Enter to Learn. Depart to Serve,” WSSU develops leaders who advance social justice by serving the world with compassion and commitment. Join us in celebrating our 125th anniversary with events throughout 2017. Learn more at www.wssu.edu/125th.

PART Celebrates Clean Air Month with Commute Challenge

The month of May is National Clean Air Month. To recognize and celebrate the positive impact alternative commuting options have on our air quality, the Piedmont Authority for Regional Transportation (PART) will sponsor a week-long social media campaign and contest focused on clean commuting.

Monday, May 15 through Friday, May 19 Facebook users are invited to post a picture of themselves to PART’s Facebook page that captures their clean commute – commuting any other way than in a single-occupancy vehicle. Taking public transportation, vanpooling, carpooling, walking, biking, and telecommuting are examples of clean commuting that Piedmont Triad residents are encouraged to try. Each day during the week, a posted picture will be chosen at random to win the prize of the day. The prizes include an Amazon Fire Stick, an Echo Dot, a Garmin Vivofit, an Amazon Fire Tablet, and Beats by Dre Earbuds.

For more information about the Clean Air Month Commute Challenge and to see the rules and restrictions, visit partnc.org/cleancommute/.

PART provides an important public service for the community and continues to enhance the quality of transportation in the Triad. Learn more at partnc.org.

North Carolina Transportation Funding Inadequate to Provide Needed Improvements to Accommodate State’s Significant Population, Travel and Economic Growth

North Carolina’s current level of transportation funding is inadequate to make needed improvements to the state’s transportation system to accommodate current and future levels of population, travel and economic growth. This is according to a new report by TRIP, a Washington, DC based national transportation organization. TRIP’s report identifies unfunded transportation projects throughout the state that are needed to improve conditions, relieve traffic congestion and improve traffic safety. Over the next decade, the North Carolina Department of Transportation (NCDOT) will have funds available for only 17 percent of needed transportation projects.

The TRIP report, Keeping North Carolina Mobile: Progress and Challenges in Providing an Efficient, Safe and Well-Maintained Transportation System,” examines road and bridge conditions, travel trends, economic development, highway safety, transportation funding, and the status of needed transportation improvements statewide. Since 2000, the state’s population has grown 26 percent and is projected to increase another 20 percent by 2035.  Vehicle miles of travel (VMT) in North Carolina increased 29 percent from 2000 to 2016 — the ninth highest rate of growth nationally.  And, from just 2013 to 2016, VMT in North Carolina has increased by 10 percent.  VMT in North Carolina is projected to increase another 25 percent by 2030.

 

Click here to read the Full Press Release.

Bernard Robinson & Company, L.L.P. Tops the List of Best Employers in North Carolina

Business North Carolina has ranked Bernard Robinson & Company, L.L.P. first on its 2017 list of Best Employers in North Carolina (small to medium sized companies), up from number 13 in 2016.  The list of the Best Employers in North Carolina was created by Business North Carolina, the Society for Human Resource Management (SHRM) – NC State Council and Best Companies Group.

This survey and awards program was designed to identify, recognize, and honor the best employers in North Carolina, benefiting the economy, workforce, and businesses in the state of North Carolina. The list is made up of 35 companies.

To be considered for participation, companies had to fulfill the following eligibility requirements:

* Be a for-profit, not-for-profit business or government entity;
* Be a publicly or privately held business;
* Have a facility in the state of North Carolina;
* Have a minimum of 15 employees working in the state of North Carolina;
* Must be in business a minimum of one year.

Companies from North Carolina entered the two-part survey process to determine the 2017 Best Employers in North Carolina. The first part consisted of evaluating each nominated company’s workplace policies, practices, philosophy, systems, and demographics. The second part consisted of an employee survey to measure the employee experience. The combined scores determined the top companies and the final ranking. Best Companies Group managed the overall registration and survey process, analyzed the data, and determined the final rankings.

Employees at Bernard Robinson & Company cited their top-rated perks as flexible summer hours, busy season perks such as omelet stations, ice cream stands, and chair massages, bonuses for passing the CPA exam, a mentoring program, employee wedding and baby showers, family trick-or-treating at Halloween, paid time off to volunteer, 100% employer paid health care, profit-sharing, 401(k) plans, telecommuting, and paid time off.

The actual rankings were published May 1, 2017, by Business North Carolina. To read more about Bernard Robinson and Company, as well as the other companies on the list, visit businessnc.com/perks-at-work/.

For more information on the Best Employers in North Carolina program, visit BestEmployersNC.com.

About Bernard Robinson & Company: Bernard Robinson & Company, the largest Triad-based CPA firm, with offices in Greensboro, Winston-Salem, and Raleigh, has been advising and serving clients nationally for 70 years.  The firm provides accounting, tax, audit and consulting services for families and privately owned businesses, high net worth individuals, and not for profit organizations. Founded in 1947, Bernard Robinson and Company is dedicated to providing the highest standards of client service, expertise, and professionalism. For more information, please visit our website at brccpa.com and check us out on Facebook.

Goodwill Holding Community Job Fair in Winston-Salem May 9

Area job seekers are invited to attend a job fair sponsored by Forsyth Tech, Winston-Salem Urban League and Goodwill Industries of Northwest North Carolina, which will include representatives from more than 10 local employers.

The job fair will be held on Tuesday, May 9, 10 a.m. to noon at Goodwill (2701 University Parkway, Winston-Salem). Employers scheduled to attend include: Astistree, Ashley Furniture, ComforCare Home Care, Herbalife, Salem Bakery Forsyth County Sheriff’s Office, UNC Chapel Hill and Truliant Federal Credit Union and  Novant Health to name a few.

Job applicants should come dressed for an interview and bring copies of their resumes. For more information, contact Goodwill Career Connections at 336-724-3625.

Click here to view flier

Tags: Job Fair

Employment Law In Focus – April 2017

Covenants Not to Compete and Trade Secrets: Protecting Your Company Against Unfair Competition

It always seems to happen when you least expect it.  Employment ends for a valuable worker who soon transforms into the corporate version of Benedict Arnold. But instead of a country, it’s a company being betrayed – and instead of military secrets, it’s financial data, customer lists, marketing strategies or other confidential information being taken or used.  Not to mention the act of suddenly going to work for a direct competitor.

So management meets and the question is asked:  “Can we stop this?”  The answer, of course, is usually the truest words spoken in trade secret and covenant not to compete law:  “It depends.”

There are two main strategies to protect a company against unfair competition and the misappropriation of trade secrets.  First is the more traditional approach of using and enforcing covenants not to compete – also known as noncompetition or noncompete agreements – which often include confidentiality and nondisclosure provisions as well.  Second is implementing a trade secret protection program, or at least taking reasonable steps to preserve the secrecy of confidential information, so you can at least argue the information is a “trade secret” when litigating a misappropriation claim in the future.

Both strategies have advantages and disadvantages, and depending on the circumstances, can be quite valuable in protecting customers and confidential corporate information.  This article provides a general overview of the most critical points for companies to be aware of in this rapidly developing area of law.

Covenants Not To Compete

Contrary to popular belief, covenants not to compete are enforceable in North Carolina and most states.  The key is whether they’re in writing, signed by the employee, supported by valuable “consideration” (such as new employment, a monetary payment or other tangible benefit), reasonable as to time and territory, and whether they satisfy any other particular requirements of the applicable state.  But it is also true that courts consistently look for ways to defeat noncompete agreements, placing the factual and legal burden squarely on the company to have drafted and executed these restrictive covenants in a proper manner.  If so, then the chance of enforcement is usually good.  If not, then count on a difficult time before a judge or jury.

Assuming that valuable consideration has been provided through the act of employment or another form of payment, the critical inquiry is whether a noncompetition agreement protects only the “legitimate business interests” of a company.  This inquiry is extremely fact-specific, and is usually a function of whether the time and territory restrictions, and any definitions of “competition,” are reasonable enough to enforce or unenforceable due to being unreasonably broad.  As a general rule, time and territory are considered in tandem, with the longer the time period the smaller the territory in order to be valid – and vice-versa.  In North Carolina, two years is usually considered the outer limit for an enforceable covenant not to compete in the employer-employee context, and the geographical territory should usually be tailored to only where the company actively conducts a significant amount of business.  In addition, North Carolina law has developed in such a way that former employees should only be restricted from actually working in those areas of their new employer that are actually competitive with the former employer, and preferably to only those areas of business in which the employee was formerly actively engaged.

Closely linked to noncompetition agreements are “nonsolicitation” restrictive covenants.  These are often part of the same written agreement, but can also be executed independently or instead of a more traditional noncompete.  Nonsolicitation agreements usually protect against a former employee soliciting to sell or selling to a company’s customer base for a limited period of time (two years again being a general maximum), with the key legal inquiry being: (1) whether the customers at issue are narrowly enough defined; (2) whether the activity being prohibited is truly competitive in nature; and (3) whether the former employee actually had material contact with the customers, or at least held a high enough position in the company (such as a vice president of sales) to where he or she regularly received confidential information regarding them, or had broad authority over other employees responsible for soliciting them.

As with noncompete agreements, the more limited the restriction the more likely a nonsolicitation agreement will be enforceable.  Unlike noncompete agreements, however, nonsolicitation restrictions usually do not require a geographical territory – rather, they’re primarily based on where the company’s customers are located.  In this sense, many courts consider nonsolicitation agreements to be a more limited, and therefore more enforceable, form of restrictive covenant, provided of course that the other requisites for an enforceable agreement are met.

Unfortunately for companies, what may be reasonable and legitimate in one set of circumstances may be quite unreasonable and illegitimate in another.  This inquiry is also governed by state law, which can be a hidden trap for multi-state corporations that use “form” noncompete agreements, as what works in one state might not work in another.

As a general rule, multi-state covenants not to compete should be avoided in favor of state-specific agreements – or at least fine-tuned for a specific state’s law if they’re used.  However, if a single format is implemented, the noncompete agreement should be drafted to satisfy the law of the most conservative state – i.e., the state where it is most difficult to enforce them.  In short, if that state’s requirements are satisfied, then odds are the requirements of less restrictive states will also be met.  But since taking this approach may sacrifice certain restrictive covenant goals that are quite valid in other states, extra care should be given to help ensure that the concern for enforcement in general does not override any critical interests which might justify state-specific formats.

If the noncompetition agreement has confidentiality and nondisclosure provisions, this can also be a helpful avenue for protecting trade secrets.  That way, even if the noncompete portion of the agreement is for some reason unenforceable, the confidentiality section might remain in effect and provide another type of breach of contract action for protecting the company.

But what happens when there is no covenant not to compete?  Or when the noncompete agreement and its confidentiality provisions are unenforceable or not comprehensive enough to adequately protect the company?  Enter the world of trade secret protection – a rapidly growing area of intellectual property law that’s usually quite separate from the traditional intellectual property fields of patent, trademark and copyright law.

Trade Secret Protection

Trade secret law frequently overlaps with enforcing covenants not to compete, but is so distinct that it can and often does stand alone.  In fact, if trade secrets truly are at issue, it can be the preferred avenue for litigation, especially in light of a poorly drafted or improperly executed noncompete agreement that probably is not enforceable.

Unlike covenants not to compete, which are usually governed by a state’s common law, trade secret law is often governed by statute.  In fact, all but two states have now adopted some version of the Uniform Trade Secrets Act, including North Carolina.  Unlike covenants not to compete, a written agreement is helpful but not required to protect trade secrets.  Therefore, trade secret law has much more flexibility than litigation involving covenants not to compete — assuming, of course, that you can prove trade secrets actually exist and have been misappropriated.

On this point, think of the Venn diagrams you probably learned in ninth grade geometry.  Then place a small circle consisting of trade secrets within a larger circle of information your company considers confidential and proprietary.  This illustrates the first key principle in trade secret law:  All trade secrets are confidential, but not all confidential information is a trade secret.  Which directly leads to the second key principle:  No matter how confidential the trade secret, if not properly cared for and protected it may lose its “trade secret” status.

Although case law varies as to what constitutes a “trade secret”, courts have generally held that it can include such diverse information as pricing, cost and other financial data, marketing strategies, product design information, research & development, feasibility forecasts, compilations of commonly known information into a unique formula, and in certain circumstances, even customer lists.  In short, trade secrets can consist of virtually any information, process, method or system if it has “independent actual or potential commercial value” and reasonable steps have been taken to preserve the very secrecy from which its value derives.

Once a trade secret is proven, then for legal action it must also be “misappropriated.”  Again, what constitutes misappropriation varies according to state law.  Typically, misappropriation is defined as the acquisition, disclosure or use of someone else’s trade secret through improper means or at least without express or implied authority or consent – unless the trade secret was arrived at by independent development, reverse engineering, or was obtained from another person with a right to disclose it.  To establish a valid claim of misappropriation, a party usually must show that the defendant knew about the trade secret and had a specific opportunity to acquire it for disclosure or use, or did in fact acquire, disclose, or use it through improper means or without the trade secret owner or possessor’s authority or consent. 

Because confidential information is not always a trade secret, the stories are legion of companies that fail the initial requirement of demonstrating a trade secret exists, regardless of whether the information has been “misappropriated.”  In addition, this realization often comes too late – after the company sues for misappropriation only to have its opponent show how reasonable steps were never taken to maintain the information’s secrecy.  In other words, if a company is going to allege trade secrets, it must be proactive from the start.  Long before a lawsuit is filed to protect them.

One of the best methods for designating confidential information as trade secrets is to implement a corporate program to achieve this objective – and since “reasonable steps to preserve secrecy” are critical to proving that trade secrets, those measures should be taken sooner rather than later.  The steps in a trade secret protection program may vary by company and the type of information being protected, but in general the process involves at least the following:  (1) identify and classify all information you consider “confidential”;  (2) improve internal and external physical security [from passwords and confidential markings to limiting facility access];  (3) address employee relationships by implementing internal confidentiality policies, noncompete agreements and/or other security measures; and  (4) protect against third-party disclosures by taking appropriate confidentiality measures with vendors, suppliers, co-manufacturers and visitors.

Conclusion

Although much more can and should be considered about covenants not to compete and implementing a trade secret protection program, this article provides a general overview of the key concepts in drafting restrictive covenants and protecting against unfair competition.  Always remember, though, that each company’s situation is different and should be analyzed separately with agreements and programs tailored to its specific needs.  Although the burden is squarely on employers when enforcing noncompete agreements and pursuing trade secret claims, the good news is that unfair competition can be avoided, and that customers, marketing strategies, financial data and other confidential information can be protected.  The key is doing it in the right manner at the right time – and unlike Benedict Arnold, for all the right reasons.

This article was written by Ken Carlson of Constangy, Brooks, Smith & Prophete, LLP