Barrett Business Services Lawsuit Alleges Trade Secret Misappropriation

Lawsuit contains useful lessons in trade secret protection

Client and candidate lists are valuable resources in the staffing industry and are often the subject of litigation between staffing firms and former employees. A lawsuit filed on March 4, 2024, by Barrett Business Services (copy attached below) is typical and provides a primer on how to appropriately protect the trade secret status of your client and candidate lists. The lawsuit alleges:

Defendant resigned her employment with BBSI on or about February 16, 2024 and began employment with Engage, a direct competitor of BBSI.

Subsequent to her departure from BBSI, BBSI learned that on the days leading up to her departure from BBIS, Defendant sent BBSI’s confidential and proprietary information to her personal email account including, but not limited to, customer insurance information including pricing, internal BBSI benefit discovery information, personally identifiable information regarding customer or prospective health plan participants and workers compensation loss runs.

Specifically, between February 13, 2024, and February 15, 2024, Defendant sent at least seven emails, each of which attached confidential BBSI documents, from her work email account to her personal email account.

Trade secrets and the valuable compilation doctrine

The lawsuit asserts that this information is a trade secret and invokes the protection of the Washington state Trade Secrets Act and the federal Defend Trade Secrets Act. Courts will generally treat a client list as a trade secret if it is properly guarded by the owner. This is true even if the individual clients identified in the list are known to the public. Once compiled into a list, the names become what is known as a "valuable compilation," that is, a list that has independent value because it took time and effort to compile. To quote this lawsuit:

BBSI also expends considerable resources to (a) identify and solicit potential employees, customers and referral sources; (b) maintain and deepen its relationship with existing employees, customers, and referral sources; (c) market its own brand and foster client and referral source goodwill; (d) develop and refine client pricing information; and (e) develop training materials and protocols for its employees to efficiently and accurately perform their job duties. The aforementioned information is valuable, confidential, and proprietary to BBSI, and is not generally known in the public domain and/or not otherwise readily ascertainable through proper means. The information has significant economic value to BBSI and would be of significant economic value to competitors in the industry.

Trade secrets must be guarded

In order to benefit from these laws, the trade secret owner must demonstrate that it takes steps to protect the confidentiality of the information. Lax handling can destroy the trade secret status and ability to obtain judicial relief. This case contains good examples of protective steps that can be taken:

To protect its legitimate business interests with respect to BBSI’s confidential information and trade secrets, and the investment BBSI makes in its employees, BBSI limits access to its confidential information and trade secrets in a variety of ways. For example, BBSI: (a) utilizes password protections to safeguard its computer systems and data; (b) designates only certain employees with access to its databases; (c) provides security monitoring of internal databases to identify suspicious activity or security breaches; (d) adheres to industry privacy standards and regulations to ensure protection of confidential information; (e) provides regular security updates and patches to address any known vulnerabilities; (f) provides regular employee training on information security practices; (g) requires employees with access to confidential information to sign restrictive covenants, which include confidentiality and non-solicitation clauses as a condition of employment; (h) implements policies prohibiting the disclosure of confidential information; (i) utilizes two-factor authentication; (j) utilizes single single-on protection (SSO) to ensure employee access is granted or revoked using a single identity; and (k) terminates or severely restricts access to its electronic databases immediately upon an employee’s departure from the company.

With non-compete agreements being outlawed or restricted in a number of jurisdictions, now is the time to ensure that your firm has taken the steps to preserve its trade secret protections.