A business commonly has all sorts of valuable assets. Most businesses have some combination of assets such as real estate, equipment, inventory, cash, receivables and patents just to name a few. One class of assets that can be misunderstood, if not entirely overlooked, are the Trade Secrets of a business. Regardless of size, virtually every business will have Trade Secrets.

Here is a little secret, there are far more Trade Secrets out there than you think. A common misconception is that Trade Secrets have to be highly technical in nature, or that only very large tech companies have them. This is not true. One of the most commonly litigated Trade Secrets is something that almost every business has…. or at least should have if it intends to make any money – Customer Lists.

Just like other assets of a business, Trade Secrets need protection. While not every customer list is a Trade Secret warranting protection, Courts routinely are confronted with cases where (former) employees and competitors wrongfully take customer lists. They can be extremely valuable to others seeking a quick competitive advantage. Here are just a couple examples: (i) customer lists and pricing information protected where former employee admitted it was confidential. Flake v. EGL Eagle Global Logistics, 2002 WL 31008136 (Tex. App.—Houston [14th Dist.] Sept. 5, 2002, no pet.); and (ii) customer lists with prior purchase information and customer/buyer preferences protected. Zoecon Indus. v. American Stockman Tag Co., 713 F.2d 1174 (5th Cir. 1983).

So what is a Trade Secret?  A Trade Secret is defined in Texas as:

Information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that: a) derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and b) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.  

Section 134A of Texas Civil Practice & Remedies Code

The Trade Secrets of a business can certainly go beyond mere customer lists. In fact, while the analysis of what constitutes a Trade Secret is case specific, the following have all previously been found in some circumstances to be Trade Secrets: marketing strategies, pricing data, business methods, vendor/supplier lists and manufacturing processes.

Now that you know your business likely has Trade Secrets, taking reasonable measures to protect the Trade Secrets is vital. You wouldn’t leave cash of a business lying around unprotected. The same goes for Trade Secrets. Like other assets of a business, Trade Secrets commonly come under attack from internal and external sources in the form of theft and misappropriation. Taking smart steps to safeguard the Trade Secrets of a business with the use of Non-Disclosure Agreements and other company policy, enforced by Injunctive relief if necessary, is one way.  Protect it or lose it.

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Remarkably, Lien Waivers continue to be among the most overlooked construction project documents. For a Developer and property Owner, the purpose of the Lien Waiver is clear: to ensure Contractors are paid so as to reduce the risk of liens on the property. The Lien Waiver is an affirmation from the Contractor to the Owner/GC that it has received a payment, and that they will not record a lien against the property for their work.

After all, getting the construction project done timely and free from liens is the goal.

In many states, as discussed in a recent article from the Credit Management Association, construction lien waivers can be like a scene out of the wild west. A standoff between Owner and Contractor over the waiver, free from any real rules and oftentimes unrestrained in scope. For example, in some instances signing a release not only waives the Contractor’s right to file a mechanic’s lien, but also their ability to file claims for other related issues such as breach of a contract, and delays caused by project mismanagement.

Wild West

Texas has become a bit more refined. In 2011, the Texas Legislature addressed the topic of Lien Waivers in Chapter 53 of the Texas Property Code. For the first time, parties to a construction contract signed after January 1, 2012 are to use statutorily prescribed Lien Waiver forms. In fact, the Texas Legislature mandated forms for both progress payments and final payment on a construction project.

The 4 different Lien Waiver forms include:

  1. Conditional Waiver and Release on Progress Payment – to be used when a contractor/subcontractor is required to execute a waiver and release before receiving a progress payment, or the progress payment is made by check.
  2. Unconditional Waiver and Release of Progress Payment – to be used when a contractor/subcontractor is required to execute a waiver and release to prove the receipt of a progress payment.
  3. Conditional Waiver and Release on Final Payment – to be used when a contractor/subcontractor is required to execute a waiver and release before receiving a final payment, or the final payment is made by check.
  4. Unconditional Waiver and Release on Final Payment – to be used when a contractor/subcontractor is required to execute a waiver and release to prove the receipt of a final payment.

Texas Property Code. Chapter 53, Section 53.284

As a commercial property Owner, you should learn to love these 4 Lien Waiver forms. When a Contractor signs a valid Lien Waiver and submits it to the Owner, the Contractor waives any lien rights it may have had for work it performed on the project to date.

Of course, there remain some notable exceptions to these waivers, such as written agreements relating to accord and satisfaction disputes, settlement of a pending court or arbitration proceeding, or agreements made after a lien affidavit claim has been filed. The Property Code sets forth the full breath of exceptions.

Bad and/or non-existent Lien Waiver practices regularly find themselves at the center of construction project disputes. As an Owner, if done correctly, the days of worrying about liens surfacing weeks or even months after the last payment should be over. Taking simple steps with Lien Waivers can build a better and more successful Owner.

With Halloween around the corner, what better time than now to see if there are dead, useless or even dangerous provisions lurking in your Employee Policy that can come back to haunt you?  Business owners or executives already know that the employer/employee environment continues to dramatically change.  This is true not just in Texas but throughout the US.

A few areas of change that employers should know about include:

  1. NON-COMPETES: Many business owners I meet still believe non-competes are unenforceable.  This is wrong.  In Texas, the law has evolved over the last 5-10 years and provides that a non-competition provision will be enforced if it is reasonably tailored as to scope, duration and geography; and otherwise complies with the non-compete statute – Texas Business and Commerce Code Section 15.50.  This means, for example, that your long-time sales executive privy to all kinds of valuable business information can be prevented from immediately jumping ship to the competitor.  There’s been a great deal of case law on this subject in recent years, and nationally non-compete agreements are subject to rather persistent criticism.  As I have written on in the past, many businesses should avoid blanket policy wherein all employees sign non-competes. It’s just not appropriate for all employees. The takeaway here is that Courts, including Courts throughout North Texas, routinely enforce compliant non-compete agreements.  When properly done, the non-compete can be a powerful tool for many businesses.  Don’t be afraid to include in your policy, just be sure to do it right.
  2. ARBITRATION: For businesses that have an employee policy or other agreement containing an Arbitration provision, there is a growing divide throughout the country on whether certain arbitration provisions are enforceable.  Particularly, are employer/employee arbitration provisions containing class or collective action waivers enforceable?  This is an increasingly important issue to employer businesses because many legal claims, including minimum wage and OT (or FLSA) claims, have collective action potential.  As this National Law Review article summarizes, the National Labor Relations Board (NLRB) found a few years ago that an arbitration agreement which precluded class or collective actions was an unfair labor practice.  What has followed is a series of conflicting appellate court findings, or split, wherein some have found such arbitration provisions enforceable and others not.  For suits here in Texas, which the Fifth Circuit court of appeals controls, such class or collective action waivers in employer-employee arbitration agreements remain enforceable.  The Supreme Court will likely resolve these conflicting lower court decisions in the not too distant future so stay tuned.
  3. CONFIDENTIALITY: In recent years, the NLRB has also been active in protecting employees’ free speech rights. Most businesses prevent workers from disclosing trade secrets and other confidential business information, and routinely have policy that restrict what employees can say to co-workers and others outside the company.  However, when the restrictions in the confidentiality policies are too broad, they may violate collective bargaining rights according to the NLRB – aiming to protect an employee’s right to speak to another, whether it be a co-worker or worker employed elsewhere, seeking to enlist support on a matter of shared employee concern. The NLRB has pursued enforcement actions against employers for this violation.  Here is a good article from accountingweb on recent NLRB findings and examples on this subject, emphasizing the intricate policy road employers must carefully follow. The policy (eg. the social media policies of the business) should be specific and thoughtfully tailored, to prohibit disclosure of confidential information of the business such as proprietary customer information, and avoid restrictions on other protected speech of the employees.

The Employee Policy of any business can be a vital tool used to establish a productive company culture, and set a framework of expectations for workers to understand and follow.  If left unattended to the changes in the law, however, the policy can also become an unenforceable piece of paper that exposes the business to employee litigation or regulatory enforcement.

With all the changes in employment law effecting businesses these days, don’t leave your Employee Policy stranded.  You may find there is more trick and less treat if you do.