Thursday, February 26, 2009
By Dan Schulte, J.D.
MDA Legal Counsel
From the February 2009 issue of the Journal
Question: A hygienist left my practice. She is now working for another practice down the street. My patients she had seen are starting to ask for their records to be transferred to her new practice. It appears she is contacting my patients directly (she must have taken or made a list of patient names, phone numbers, etc.) and soliciting them to continue seeing her at her new practice. What I can I do about this? Isn’t this illegal?
Answer: Your employment agreements and/or employee manual are your first line of defense in this scenario. Any employee who has access to your patient contact information should have an employment agreement containing an obligation to maintain the confidentiality of your patient’s contact information and a duty not to disclose, transfer, etc., the contact information under any circumstances.
If you did not have an employment agreement with this hygienist, I hope you have an employee manual or other document that is binding on all of your employees as a condition of their employment, and which contains similar confidentiality language. You should also have an acknowledgment form or some other document that has been signed by the hygienist acknowledging that she is required to follow the confidentiality and other provisions contained in the manual. (Links to sample confidentiality documents and agreement forms appear below.)
Either an employment agreement or your employee manual will enable you to sue the hygienist for breach of contract and seek damages for the loss of business resulting from the hygienist’s illegal use of your patient contact information. You should also consider pursuing other claims for tortious interference, unfair competition, conversion, misappropriation, etc.
Michigan’s Uniform Trade Secrets Act (“MUTSA”) (MCL 445.1901 et. seq.) may also provide a remedy if you are able to establish that the hygienist has misappropriated a “trade secret.” If applicable, MUTSA provides you with injunctive relief (a court order preventing the hygienist from contacting your patients or otherwise using the patient contact information) in addition to money damages for your loss of business.
MUTSA will only be applicable if your patient contact information is deemed to be a trade secret as defined by Section 445.1902(d). That definition requires, among other things, that your patient contact information be “the subject of efforts that are reasonable under the circumstances to maintain its secrecy.” Specifically, courts that have interpreted this definition have looked at the following factors:
- the extent to which information is known outside of the owner’s business;
- the extent to which the information is known by employees of the business;
- the extent of measures taken to guard the secrecy of the information;
- the value of the information to the owner of the business and competitors;
- the amount of effort and money expended in developing the information; and
- the ease or difficulty with which the information could be properly acquired or duplicated.
Therefore, it would be difficult to establish that this information is a trade secret as defined by MUTSA in the absence of employment agreements or employee manual provisions containing confidentiality obligations and strict limits being placed on access to patient contact information (e.g., password-protecting computer files, granting access to a written list to a select few employees, etc.) or other objective measures being taken to secure your patient contact information.
You should pursue a claim under MUTSA with caution for another reason. That is because MUTSA “displaces” conflicting legal theories that may be applicable to a misappropriation of a trade secret or similar information. When MUTSA was enacted in 1998 the Legislature intended that claims arising from misappropriation of trade secrets (as defined by MUTSA) would be consolidated and filed only as violations of MUTSA. This means that the other legal theories mentioned above (tortious interference, unfair competition, conversion, misappropriation, and others) would be dismissed by a court if you also sought a remedy under MUTSA. Your risk in alleging both a violation of MUTSA and seeing damages under these other theories is that the other theories may be dismissed. If it is later found by the court that your patient contact information is not a trade secret as defined by MUTSA, that claim may also be dismissed — leaving you with no case.
There is no substitute for the use of employment agreements and a properly constructed employee manual. Litigation arising from the scenario you describe can be complex. You should seek advice and representation from an attorney experienced in these matters.