Breach of Confidentiality and WARN Act Analysis: Greene's Case

Application of Law: Jennifer's Breach of the Confidentiality Agreement

Was Jennifer in breach of the confidentiality agreement she signed committing never to disclose confidential or proprietary information she encountered in the course of her employment at Greene's?

In Hallmark Cards, Inc. v. Janet L. Murley (2013), the defendant (Murley) parted ways with the plaintiff (Hallmark Cards) and was paid a total of $735,000 as a severance package. As Hallmark's marketing vice-president, Murley had come across and was in possession of confidential information regarding the company's operations. That information included, but was not limited to, market research and business plans. Upon receiving the severance described above, Murley agreed, among other things, to dispose of any confidential documents and to ensure that the company's confidential information was not disclosed to any third party. Years later, the defendant was hired by a company called RPG as a consultant, for which she was offered a total of $125,000. Following her engagement, she passed on key Hallmark documents and information to RPG. Hallmark initiated a lawsuit upon learning of these developments. According to Peacock (2013), "the jury returned a verdict in Hallmark's favor for $860,000 — equal to her severance pay plus her consulting fee with RPG."

On the strength of the jury verdict above, Greene's appears to be in a strong position to pursue a breach of contract claim against Jennifer. All of Greene's executives, including Jennifer, signed a confidentiality agreement. In that agreement, Jennifer committed to ensuring that all confidential information or data she had acquired in the course of her employment at Greene's was never disclosed to a third party. The process that Greene's used in the creation of Ever-Gold was confidential. There is sufficient evidence that Jennifer retained a letter containing information detailing Ever-Gold's secret creation process. In addition to retaining that information, she went ahead and disclosed it to a competitor. There is no doubt that Jennifer's actions violated the confidentiality agreement she had signed while employed at Greene's. Indeed, in Hallmark Cards, Inc. v. Janet L. Murley, the Eighth Circuit was categorical that "under her agreement with Hallmark, Janet Murley was required to maintain the confidentiality of certain company information and was prohibited from using or disclosing Hallmark's documents and other records after leaving the company, but failed to meet her obligations" (Frey, 2015, p. 118).

Hallmark Cards Precedent and Damages

Greene's would therefore be seeking damages in an amount equivalent to the business loss and harm it would suffer as a consequence of Jennifer's disclosure of the proprietary process used to make Ever-Gold. Towards this end, we would base our entitlement on the fact that Jennifer's engagement with Howell was primarily anchored on her disclosure of confidential information relating to Ever-Gold's production process. There is evidence indicating that the contract she signed with our competitor contained a specific provision addressing the handover of that proprietary information.

As Frey (2015) points out, in Hallmark Cards, Inc. v. Janet L. Murley, "Hallmark based its entitlement to the fact that Murley's value to RPG rested, in large part, on her disclosure of materials and information that belonged to Hallmark… the jury returned a verdict in favor of Hallmark, awarding it $860,000 in damages…" (p. 117). On the strength of the information provided above, there is a high probability that Greene's will prevail in this particular legal dispute.

Did Greene's violate the WARN Act in its termination of Jennifer?

Application of Law: Greene's Potential WARN Act Violation

In Chestnut v. Stone Forest Industries, Inc. (1993), the defendant initiated a mass layoff as a consequence of its assessment of prevailing business conditions. Changes in market dynamics dictated that for Stone Forest Industries to remain in business, it had to lay off a total of 81 employees. The affected employees brought a class action suit under the WARN Act, indicating that the company did not afford them the mandated 60-day notice. Stone Forest Industries argued that the layoffs were necessitated by unforeseeable business conditions, and thus sought to escape liability under the Act. The court ultimately found "that the defendant qualifies for the exception set forth in section 2102(b)(2)(A)" (Justia, 2020).

With regard to Jennifer's countersuit alleging wrongful termination, Greene's probability of prevailing by invoking exceptions to the WARN Act is rather low. This is especially true given that Greene's will only succeed if it can demonstrate that its actions fall within the Act's three recognized exceptions — and also prove that the termination qualifies as a mass layoff. In the words of Gross and Compa (2009), "for compliance purposes, a mass layoff refers to downsizing that will affect 500 or more total employees, or between 50 and 499 employees if they represent 33% or more of the company's workforce" (p. 39).

The first exception relates to a faltering enterprise. On this front, which largely pertains to plant closings, an enterprise must be experiencing difficulty remaining a going concern and must have consequently sought additional capital. The WARN Act would not apply in instances where providing a 60-day notice is likely to interfere with obtaining that capital. Second, there is what Gross and Compa (2009) refer to as "unforeseeable business circumstances" (p. 37). Under this exception, a 60-day notice may not be required if the business circumstances triggering the layoffs were not anticipated. Third, the WARN Act may also not apply in the case of natural disasters that affect the business's ability to continue operations — including, but not limited to, storms causing severe damage to company infrastructure, earthquakes, and floods.

In Chestnut v. Stone Forest Industries, Inc., the defendant was able to successfully invoke the "unforeseeable business circumstances" exception. Greene's does not share the same circumstances, as there is nothing to demonstrate that the company initiated layoffs as a consequence of largely unanticipated events. Furthermore, there is no indication that the enterprise's operations had been affected by a natural disaster or that the company was faltering. Most importantly, this termination cannot be characterized as a mass layoff — particularly given that it appears to target only junior executive secretaries.