Suit highlights risks of employee data theft

 Jacqueline Birzon, The Daily Record Newswire

Technology can cost employers a pretty penny — but without proper legal precautions, technology’s costs can really soar when its wonders are placed in the wrong hands.

That’s the lesson to be learned, attorneys say, from the case of Oceanside wholesaler First Manufacturing, a distributor of leather apparel and motorcycle gear whose owners accused two ex-employees of sharing private company information with a direct competitor.

Mohammed Shafqat, owner of that director competitor — New Jersey-based Shaf International — said he and a former First Manufacturing employee “wiped their ass” with cease-and-desist letters from Long Island attorney Erica Garay, according to First Manufacturing’s Sept. 29 lawsuit.

But he allegedly did more than that with confidential information provided by the former First Manufacturing employees, and so far, the Suffolk County Supreme Court agrees: On Nov. 3, Justice Thomas Whelan issued a preliminary injunction preventing the former employees – who are named directly in the suit – from divulging First Manufacturing details to Shaf.

Garay, a member of Garden City law firm Meyer, Suozzi, English & Klein representing First Manufacturing in the suit, said the judge’s order “enforced the common law right” an employer has over his original property. First Manufacturing didn’t execute an employment contract with the ex-workers — that is, there was no official noncompete agreement — but the former employees still misappropriated trade secrets, breached fiduciary duties, defamed their former employers and engaged in unfair competition, according to the attorney.

“An employee is free to use their skills and general knowledge of an industry [at their next job], but they can’t take confidential, proprietary information they may have had access to and use it to their former employer’s detriment,” Garay said.

The suit also charges that Shaf International was complicit in the scheme, in which the ex-workers allegedly passed along First Manufacturing’s client lists, inventory lists and purchase orders.

Gregory Lisi, head of Uniondale law firm Forchelli, Curto, Deegan, Schwartz, Mineo & Terrana’s labor and employment department, said cases like this highlight how remarkably common employee data theft has become.

“I think the problem is the technology has advanced so quickly to make it easier for employees to do their job,” Lisi said. “But when they leave … it is that much easier for them to have access to [information], and there can be problems.”

While he’s not familiar with the exact details of the First Manufacturing case, Lisi suggested the ex-staffers might have violated the “faithless servant doctrine,” a facet of employment law that holds workers liable for financial losses resulting from disloyalty.

“It’s a very nasty doctrine,” Lisi noted. “But you can actually get back the employee’s salary for not being loyal to your company while he was working for you.”

Best practices for avoiding these ugly scenarios, Lisi said, include having current and new employees sign a restrictive covenant agreement “with some teeth in it” — something that lets employees know, in no uncertain terms, they cannot misuse proprietary company information.

And the more teeth the better, according to Garay, who noted the preliminary injunction requires the former First Manufacturing workers to forfeit the data they apparently stole from their former employer. In the digital age, the attorney noted, it can be difficult for courts and litigators to enforce such legal orders.

“In the old days, if an employee were to steal, they might be standing over a Xerox machine in the middle of the night,” she said. “Now you can send an email or use a thumb drive. It becomes more challenging to police.”

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