Mark Pestronk
Mark Pestronk

Q: I am an independent contractor of a host agency that I am not happy with. I am thinking of switching hosts. I reviewed my independent contractor agreement, which is lengthy and confusing to me. Among other things that I cannot do after leaving, it states that I cannot disclose or use any of the host's "trade secrets." What is a trade secret? What are some examples? Is a client list a trade secret?

A: "Trade secret" is a term that is often misunderstood. Although the term has a specific meaning in the law, it is often used very broadly to threaten departing employees and independent contractors with lawsuits.

"Trade secret" is defined by the Uniform Trade Secrets Act, which every state has adopted, as "information, including a formula, pattern, compilation, program, device, method, technique or process that 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 is the subject of efforts that are reasonable under the circumstances to maintain its secrecy."

In other words, a trade secret is something that competitors don't know about and that the agency has tried to keep secret from all competitors and from employees and ICs that do not need to know it.

Most travel agencies obviously do not own any "formula, pattern or device" of any kind, but they do have "compilations of information" that provide an advantage over competitors that do not have the information. Examples would be client lists, traveler and corporate profiles, management information reports, preferred supplier lists and nonstandard commission and override data.

For this information to qualify as trade secrets, the agency must not only compile it, but it must also take steps to keep it secret, such as having it accessible only on a password-protected document or company intranet.

The trouble with trade secrets is that it's always a judgment call whether the agency's efforts to maintain secrecy have been "reasonable under the circumstances." For example, if all the front-line agents have access to the password-protected client list, it is not going to be clear whether the agency has taken sufficient steps to maintain secrecy.

In my experience, when former employees or ICs compete with the ex-employer or host, the company sometimes threatens a lawsuit under the Uniform Trade Secrets Act for misappropriation of trade secrets not only against the departed employee or IC but also against the new employer or host. Most of these threats can be ignored because the company is not going to go to the expense of suing when it is not really certain whether the information being used qualifies as a trade secret under the definition set forth above.

To protect competitive information, an agency is much better off simply prohibiting an ex-employee or IC from handling travel arrangements for any of the agency's clients for a year or so, if such a restriction is enforceable in your state.

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