Legal Question in Technology Law in California

Re: disclosure form

Your question suggests that you may not have a really clear understanding of the sharp distinction in California between restraint of trade and occupational choice (illegal) and protection of trade secrets (legal).

In California, a contract requiring an employee or contractor to refrain from engaging in any legal business, trade or occupation is illegal as contrary to public policy. See Business & Professions Code section 16600 (and the narrow exceptions set forth in sections 16601 and 16602).

You not only cannot have an employee or contractor agree not to take away your customers or business contacts, such a provision in a contract may invalidate the other provisions of the contract.

On the other hand, it is illegal for an employee or contractor to obtain and mis-use your trade secrets, and customer and business contact information may, under many circumstances, be trade secret.

Although misappropriation of trade secrets is illegal whether or not the employee or contractor has signed an agreement not to do it, many employers find it useful to remind their employees, contractors, consultants, vendors, and others who may come in contact with trade-secret information of their duty not to use such information to the detriment of its owner (you).

Protecting information such as customer lists as trade secrets requires that the owner have expended some time, energy and expense in preparing the list - i.e., it could not be found in the Yellow Pages or a standard trade directory - and have expended some effort to keep it secret, such as keeping it in a locked file cabinet and instructing those with access that it is valuable and not to be copied or left unlocked and unattended (for example).

Your company seems to be at a growth point where reliance on preprinted forms may be dangerous and inappropriate; I would suggest considering retaining a business attorney to review your corporate records, bylaws, meeting minutes and stock register, licenses and trademarks, personnel manual and practices, and in particular, you employment agreements and independent contractor agreements. Trade secret protection policies should be part of your agreements with each employee, contractor, and probably other outsiders (vendors, consultants, maybe even customers) who may have access.

If you absolutely must have a form, go to a law library and borrow from the CEB manual on employment law for new California employers.