Install

Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

When Workers Steal Trade Data

Russian employees are starting to leave companies armed with the knowledge and experience needed to start their own businesses -- as well as the valuable trade information that can give them an inside track as a new competitor.


In any country, employers are vulnerable when workers take off with company secrets and client lists. Although there are laws on the Russian books that protect employers' confidential trade information, the lack of precedent-setting court decisions means that employee and employer rights are less clear-cut in these instances than in the West.


Workers who break a contract agreement, or restrictive covenant, and take company secrets to their new places of employment are obligated to compensate their former employer for the inflicted damages, according to Article 139 of the Russian Civil Code.


Article 139 defines an official or trade secret as information that possesses "actual or potential commercial value due to the fact that it is unknown to third parties, there is no free access to it on a lawful basis and the possessor of the information takes measures to protect its confidentiality."


Lorna Townsend, a lawyer with Baker & McKenzie, said the extent to which restrictive covenants may be enforced is unclear. "You can't stop employees from working with a competitor," she said.


In the United States, employers can impose restrictions upon their employees' use of confidential information and restrict them once they engage in a competitive business. Restrictions may include not soliciting the company's clients in a certain territory, for a certain period of time.


The U.S. employer generally defines the trade secrets, which may include both customer and price lists, said Kevin Dent, an attorney with the Western law firm, Baker & Botts.


But sinc e there are no precedents in Russia, it is vital for both the employer and employee to clearly define the secrets in writing in an employment contract, Dent said.


"Here you have much more incentive to be more specific in a contract, because you have nothing to fall back on," he added.


Legal precedents in Russia would be welcomed by companies that so far have had to solve these problems internally.


According to a source close to one Western ad firm, a Russian employee handled a client's account while simultaneously working with the same client on the side. Even though he broke the firm's rules, the Russian employee told his employers that he had never signed a contract with them and therefore was not bound by their restrictions.


A second employee at the same firm had to sign a contract upon leaving the company which specified that she could not contact any of the firm's clients. The contract further stipulated that she could not contact any person or company with whom she had made contact through the firm -- including non-clients -- for a set number of years.


"If the contract is overly restrictive, though, a court is unlikely to uphold it," said Baker & McKenzie's Townsend.


"Some employers include clauses in contracts whose enforceability is questionable, in the hope that the employee will nevertheless feel bound by it," she said. "Problems can arise, however, if the employer attempts to enforce such a clause against a reluctant employee, and the employer may find itself in court with a damages claim against it."


According to Article 5 of the Russian Labor Code, provisions of labor contracts are not valid when they worsen the employers' standing in comparison to labor laws, said Dmitry Pentsov of Baker & Botts. Pentsov added that he has seen several contracts in which the employer included additional clauses which would probably not be upheld in a Russian court.


The issue of confidential information is covered in a second piece of legislation: Chapter 3, Article 10 of the Russian Federation Law on Competition and Restriction of Monopoly Activity on Commodity Markets. The law prohibits unfair competition, which is defined as the receipt, use and divulgence of scientific and technical, production or commercial information, including commercial secrets, without the consent of its holder.


This law specifically targets employees who create their own businesses by using a former employer's secrets. However, if the former employees use the prohibited information while working for a new company, the new employer is also held responsible and liable for damages, Pentsov said.