Nov 18, 2014

LinkedIn Cases Implicating FCRA and Trade Secrets

Recently, a class action lawsuit was filed in federal court against LinkedIn, alleging it violated the Fair Credit Reporting Act (FCRA) by making employment history available to potential employers. Additionally, a California employer sued a previous employee for misappropriation of trade secret information when the employee kept a customer list via his LinkedIn contacts.

LinkedIn and the Fair Credit Reporting Act (FCRA)

LinkedIn is a professional social media network with more than 313 million members in over 200 countries and territories. Recently, individuals alleged that LinkedIn’s “search for references” feature may have kept employers from hiring them. The individuals contend that LinkedIn allows potential employers to anonymously search the employment history of any LinkedIn member and make hiring and firing decisions based upon the information gathered – all without the knowledge of the member, and without any safeguards in place as to the accuracy of the information obtained.

The case, Tracee Sweet, et al. v. LinkedIn Corp., was filed in the U.S. District Court for the Northern District of California on October 4, 2014. The potential class alleged that LinkedIn violated the FCRA by: (1) failing to comply with the certification and disclosure requirements mandated by the FCRA; (2) failing to maintain reasonable procedures to limit the furnishing of consumer reports for the purposes enumerated in the FCRA and to assure maximum possible accuracy of consumer report information, and (3) failing to provide users with the reference reports and notices mandated by the FCRA.

LinkedIn and Employer Trade Secrets

David Oakes worked for Cellular Accessories For Less as a Sales Account Manager for six years before leaving the company. Mr. Oakes signed an agreement with Cellular that he would not misuse Cellular’s propriety information, including its customer list. When Mr. Oakes opened a competing mobile accessory store, Cellular filed a lawsuit. In Cellular Accessories For Less, Inc. v. Trinitas LLC, Cellular alleged breach of contract, trade secret misappropriation, and unfair competition. Mr. Oakes moved for summary judgment, claiming, among other things, that his LinkedIn contacts were not a trade secret under California’s Uniform Trade Secret Act.

The federal district court in California first determined that a customer list can constitute a trade secret, but only if the information contained in the list is not easily and publicly available, and the employer used significant and sophisticated efforts to compile it. The court then decided that whether Mr. Oakes’s LinkedIn contacts, which he acquired during his employment, were Cellular’s trade secret should be decided by a jury. The primary dispute involved the extent to which Mr. Oakes’s LinkedIn contacts were viewable to other LinkedIn members or users. The court chose not to independently review the functionality of LinkedIn profiles and how profile information was viewable, but instead acknowledged that the parties disputed how Mr. Oakes’s LinkedIn contacts could be made public and held that a jury should decide the matter.

These two cases serve as reminders that social media networks are becoming increasingly common in the workplace, and therefore, employers should tread cautiously to avoid the unauthorized access of others’ information, as well as to safeguard the unauthorized publication of its trade secrets and proprietary information.

If you have any questions about any of the issues discussed in this alert, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.

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