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Running head: GREENE’S JEWELRY LEGAL MEMORANDUM

Greene’s Jewelry Wholesale v. Jennifer Lawson Legal Memorandum David PEKALA MBA 610 – Business Law

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Running head: GREENE’S JEWELRY LEGAL MEMORANDUM

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Legal Memorandum

TO:

Mr. Scappatura, Head Greene’s Jewelry Wholesale Legal Department

FROM:

Mr. David Pekala (Legal Intern)

RE:

Greene’s Jewelry Wholesale v. Lawson Breach of Confidentiality and Lawson v. Greene’s Jewelry Wholesale Unlawful Employment Termination

Date:

9 June 2019 Introduction This case finds an employee, Jennifer Lawson, upon termination removing confidential

information detailing the process for creating Ever-Gold which is at the foundation of Greene’s Jewelry Wholesale LLC marketing success (Greene’s). As a result of her breach of contract Greene’s has sued Ms. Lawson for illegally providing the trade secret to Ever-Gold to at least one competitor. The strengths for this case are 1) Ms. Lawson had signed and executed a confidentiality agreement whereby she was prohibited from removing or sharing company trade secrets, 2) whilst her performance as a junior executive secretary was scored with high marks during her annual performance review she did repeatedly and routinely arrive to work late (15-30 minutes on average), 3) the entire “Junior Executive Secretary” job classification was eliminated as a result of downsizing and not just her position, 4) her pregnancy is circumstantial to the decision taken by Greene’s to downsize as the state of New Hampshire is considered an employment at-will state. As a result of our lawsuit against Ms. Lawson for breach of confidentiality she has countersued for wrongful or unlawful termination due to pregnancy.

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Facts and Laws Employment Discrimination: Ms. Lawson is claiming wrongful termination/discrimination due to her pregnancy which was announced during a discussion with the Head of Human Resources, Lisa Peele, in an attempt to secure additional time off from work due to some “high-risk” factors associated with the pregnancy. Based on the facts as presented not once did Ms. Peele indicate Ms. Lawson was being terminated due to either her pregnancy or the numerous documented cases of tardiness. In fact Ms. Peele clearly indicated the decision was made at the corporate level in an attempt to downsize the organization and that all Junior Executive Secretaries would be eliminated and in essence Ms. Lawson’s visit to HR and her pregnancy are circumstantial to this corporate decision. Considering these facts the issue of Ms. Lawson’s pregnancy was not in consideration other than a comment made by Ms. Peele indicating that the request for additional time off due to the pregnancy can be granted in the form of termination of the employment. Contract issues: Ms. Lawson upon hiring signed and executed a confidentiality or nondisclosure agreement (NDA) which in essence is a valid bilateral contract between her and Greene’s defining and restricting information that can be shared both during and after her employment. Upon her termination Ms. Lawson returned to her desk unescorted and proceeded to remove personal effects and in that process she also removed a draft letter containing the manufacturing steps and/or other confidential information regarding the production of Greene’s proprietary Ever-Gold line of products. In the process of trying to secure a new job with the main competitor Howell Jewelry World (Howell), Ms. Lawson used this draft letter as a negotiating tool to secure first a job interview and then employment. This action clearly violated

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the still in force confidentiality agreement between her and Greene’s thus resulting in a breach of contract. Employment/Contract Laws: The Pregnancy Discrimination Act or PDA of 1978 as amended to Title VII of the Civil Rights Act of 1964 prohibits sex discrimination based on pregnancy. Pregnant employees shall be treated the same for all employment related purposes and cannot be terminated solely based on the pregnancy. Furthermore New Hampshire’s Unlawful Discriminatory Practices law, RSA 354-A:7 also defines sex in section VI (a) to include pregnancy and medical conditions which result from pregnancy and section VI (b) indicates an employee shall take and use leave of absence for the period of physical disability resulting from the pregnancy. New Hampshire recognizes employment as “at-will” meaning the employer can terminate an employee at any time, for any cause, and without advanced notice if the termination does not violate federal and state law against employment discrimination as described above. New Hampshire also recognizes the same elements for contract law as general contract law (Upcounsel, n.d.) and they are agreement, consideration, capacity, genuineness of assent, and legality of purpose (McAdams, 2015). For this purpose of this memorandum the NDA is considered a contract that would fall under the rule of law as applied by general contract law. Precedent Employment Discrimination: A thorough search of decided state cases from New Hampshire was conducted and three cases are presented here that support Greene’s position in terminating the employment of Ms. Lawson. In the first case (Smith v. Morse, 1995) the plaintiff alleged breach of contract and employment discrimination against her employer when

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her employment was terminated whilst she was on medical leave for the birth of her child. The defendant claimed they had recently purchased the business and in the process of the acquisition the new owners determined the former company was “burdened with a highly inefficient management structure”. The evidence shows this was done independent of the plaintiff’s pregnancy announcement and decisions were taken on the applicability of the role against the company organizational chart and not the person occupying the role per se. Furthermore, despite the plaintiff being promoted prior to maternity leave as a result of this reorganization, it was determined that while away on maternity her duties which were now split between 4 other employees were being satisfactorily covered with no gaps in performance or deliverables. Because of this observation the decision was taken to further streamline the management structure and eliminate the plaintiff’s position. The court found the defendant did not discriminate against the plaintiff by the preponderance of the evidence and they concluded that even if gender bias was part of the decision to eliminate the position it would have occurred in the absence of the plaintiff’s pregnancy and subsequent maternity leave. This case strongly supports Greene’s position of eliminating the position of junior executive secretary without bias or discrimination. The second case to consider is where the plaintiff claimed sexual harassment and unlawful retaliation against the defendant for her termination (Madeja v. MPB Corp, 2003). In this case the defendant claims poor performance for the termination however the plaintiff claims the termination resulted from her filing a complaint against fellow employees for sexual harassment. Despite the evidence supporting the defendant’s claim of poor performance there was also sufficient evidence to support the plaintiff’s claim of sexual harassment. In that

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evidence the defendant clearly did not address the plaintiff’s complaint and instead continued to focus only her poor performance in an apparent effort to build a case for termination. After a period of time the plaintiff was dismissed for poor performance. The court found the defendant’s “remedial action (to the complaint of sexual harassment) must be reasonable and adequate” and said remedial action must “stop the individual harasser from continuing to engage in such conduct and to discourage other potential harassers from engaging in similar unlawful conduct”. The court found for the plaintiff in this case ruling her termination was unlawful due to insufficient action by the employer to investigate and address the sexual harassment charges against a fellow coworker. This case while finding for the plaintiff is important because it emphasizes the importance of due diligence on behalf of the employer in taking a decision to end the employment of an employee while ensuring that decision does not consider personal reasons (i.e. from the employee’s perspective) as supporting reasons for employment termination. In Appeal of Gilean (1994) the plaintiff claimed unlawful termination despite an alleged medically acceptable leave of absence. The plaintiff had been issued several warning letters regarding unapproved absenteeism and as result of these behavioral actions his employment was terminated. The plaintiff claims an underlying medical condition was the foundation of the absenteeism however the plaintiff did not follow instructions from the defendant regarding submitting a proper application for sick leave. Furthermore, while claiming incapacitation from his medical condition the plaintiff was actively engaged in seeking an alternative employment opportunity. The defendant issued several warning letters to the plaintiff and in parallel determined from their own medical advisers that the plaintiff’s underlying medical condition did

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not rise to the level of requiring absence from work. Because of the chronic absenteeism plus filing a false medical leave claim the court found for the defendant and upheld the termination. This case demonstrates the need for proper due diligence and record keeping on behalf of Greene’s in this case to ensure the rationale for termination was based on facts supporting the elimination of the junior executive secretary position and not the termination of Ms. Lawson because of her pregnancy and/or her chronic tardiness. Contract and Non-Disclosure Agreement Dispute: Presented here are 3 cases which provide support to Greene’s position that Ms. Lawson violated her (NDA) when she provided the technical conditions for the manufacturing of Ever-Gold to Howell. In ACAS Acquisitions (Precitech), Inc. v. Hobert (2007) the trial court found the former employee through his actions of soliciting new employers using technical information from his former employee did indeed violate his NDA. Upon appeal the appellate court’s decision was affirmed and found the former employer and new employer were competitors and the information being disclosed by the former employee could not be found in public sources. In Grafton Data Sys. v. Moore (2016) the plaintiff alleges the defendant upon leaving the employment at Grafton and moving to a competing company used confidential information in the process of securing a contract or project formerly under consideration (not signed or awarded) by the plaintiff. The plaintiff further asserts this was in violation of a non-compete contract which also contained non-disclosure language. The court found in this case that the nature of the business (signage design and production) is not exclusive to the plaintiff’s company and since the design plans and pricing were submitted to a client with no expectation of confidentiality the plaintiff cannot claim the defendant revealed anything new to the potential

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customers. Since the plaintiff did not establish any harm from the defendant violating the noncompete agreement the court ruled in favor of the defendant denying the plaintiff’s request for a motion for preliminary injunction. The third case to consider is Brian’s 1:1 Fitness v. Woodward (2013) where the plaintiff alleges the defendant violated a non-competition agreement when he opened his own fitness business in direct competition to the plaintiff. Through testimony the court learned the defendant was considered an independent contractor for the plaintiff who paid the plaintiff a monthly service/rental fee. The court ruled the non-competition agreement in effect was a restriction of free trade as it violates public policy and thus denied the plaintiff’s motion. These cases are supportive for Greene’s in that the first case clearly sides with the plaintiff when the information being shared in violation of the NDA can be considered not available in the public space and is thus a trade secret. The other 2 cases further support this position in that both plaintiffs lost their cases when the court ruled the information shared in violation of the NDAs was not considered confidential and in fact upholding the NDA would be unreasonable in the restraint of free trade and unenforceable on the grounds of public policy. Facts to be Determined Considering the facts known at this time and detailed earlier in this memorandum and taking into consideration the case files cited here in support of Greene’s case, some additional questions need to be answered to further strengthen the case. The condition of Ms. Lawson’s employment needs to be firmly established as an “at-will” employee and not one under contract. This would support the decision taken by Greene’s to terminate her employment with or without cause as permitted under New Hampshire employment law. Also, a thorough review of Ms.

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Lawson’s personal file is strongly recommended to assure there is adequate documentation regarding her chronic absenteeism as possible supporting evidence to her character as an employee prior to her pregnancy. Also, the employment status of the other junior executive secretaries needs to be determined as it is implied that the position was eliminated in the company and the impact of that decision went beyond the termination of employment for Ms. Lawson. Furthermore, the timeline for the decision to eliminate the junior executive secretary position needs to be defined to ascertain when the final decision was reached regarding Ms. Lawson’s visit to HR to request special consideration for her pregnancy. Did Ms. Lawson request FMLA or some other federally mandated medical leave or was her request general in nature asking for leniency in taking off time and/or being tardy as needed to address her pregnancy risks? These facts are important in that they can establish that there was no discrimination as defined in Title VII or PDA with respect to terminating her employment. Regarding her NDA it needs to be determined if both Ms. Lawson and a representative of Greene’s signed the contract and if Ms. Lawson understood the language and the covenants invoked in the NDA. The contractual status of the NDA will support Greene’s position of a breach of contract considering the cases cited earlier clearly support upholding the contractual obligations in a NDA when the information revealed is not readily available from a public source as is in the case of Ever-Gold which can be considered a trade secret of Greene’s. The finding in ACAS Acquisitions (Precitech), Inc. v. Hobert (2007) directly supports this contention.

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Application of the Law to the Facts There are two main areas of focus for this case. The first is successfully demonstrating that Ms. Lawson substantially violated her NDA with Greene’s and during that violation did cause harm to Greene’s. The second area of focus is successfully demonstrating that Ms. Lawson was legally separated from her employment from Greene’s with no bias toward her past performance or her current pregnancy. Regarding the former area of focus the decision from ACAS Acquisitions (Precitech), Inc. v. Hobert (2007) presented earlier in this memorandum provides strong support and evidence to demonstrate a preponderance of the evidence supports Greene’s position that the NDA was valid, was broken upon her departure, and in the process of breaking the NDA Ms. Lawson did harm to Greene’s. Grafton Data Sys. v. Moore (2016) is extremely helpful as the court found that the nature of the information being shared is integral in deciding if the NDA was violated. That case ruled that the information shared by the defendant was not considered proprietary to the plaintiff and thus was available in the public domain. In this case it can be proven by the evidence that the process to manufacture Ever-Gold is indeed a company secret held only by Greene’s and when Ms. Lawson shared the process with a direct competitor that created a situation where the competitor erased a competitive edge. The final case Brian’s 1:1 Fitness v. Woodward (2013) is more important to the definition of Ms. Lawson’s employment as it relates to the NDA in that she was not considered an independent contractor of Greene’s and as such cannot claim any restriction of free trade in the sharing of the company’s secrets. In summary the rulings from these three cases plus the recognition by New Hampshire that NDAs are regarded as general

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contract law (Upcounsel, n.d.) provide a preponderance of evidence which overwhelmingly supports Greene’s position. The other area of focus is Ms. Lawson’s countersuit where she is claiming she was discriminated when her employment was terminated shortly after she made an announcement/request for special consideration related to her pregnancy. On the surface it would seem Ms. Lawson is able to demonstrate her case is valid however the law and case law do not support her position. New Hampshire employment law recognizes and affirms the at-will employment rule where an employer can terminate the employment of any employee for any reason if that reason does not violate federal or state law such as Pregnancy Discrimination Act or PDA of 1978 as amended to Title VII of the Civil Rights Act of 1964 or New Hampshire’s Unlawful Discriminatory Practices law, RSA 354-A:7. Smith v. Morse, 1995 perhaps is the strongest case law to support Greene’s defense that Ms. Lawson was terminated without any violation to the laws referenced above. Madeja v. MPB Corp (2003) and Appeal of Gilean (1994) provide strong supporting case law evidence to further bolster the defense for Greene’s where despite the former case finding for the plaintiff the ruling clearly demonstrates the importance of due diligence on behalf of the employer in taking a decision to end the employment. Greene’s corporate level decision to eliminate an entire employment classification (Junior Executive Secretary) was taken without malice or intent to any single employee and it is circumstancing that Ms. Lawson was employed in that capacity when she approached HR requesting special consideration for her pregnancy. The latter case found for the defendant and the ruling demonstrated the need for proper due diligence and record keeping with respect to terminating employment. Again, Greene’s in

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this case has a clearly defined rationale for the decision to eliminate the junior executive secretary position and that decision did not consider the behavior of any of the employees (including Ms. Lawson) in that role. The law and the case law cited here clearly and strongly support Greene’s position that Ms. Lawson was legally terminated and in the course of that termination they did not discriminate against her with respect to her sex and/or her pregnancy. Regarding weaknesses it is felt they are minor and with proper documentation review and preparation they can be managed. Ms. Lawson’s behavior as an employee should be considered with respect to her chronic absenteeism and documentation made available to demonstrate that while she performed her job well when she was present she also was frequently late for work and as such could be considered an unreliable employee. Again ...