A recent Massachusetts Supreme Judicial Court decision may make it more difficult for employers to stop former employees from using or sharing confidential business information.

In Daikin Applied Americas Inc. v. Russo, a commercial HVAC company alleged that two former employees took confidential information, contacted company customers, and used that information to help launch a competing business. Daikin asked the court for a preliminary injunction preventing the former employees from soliciting certain customers for one year.  The court denied the request, finding that Daikin had not shown it would suffer “irreparable harm” if the injunction was not granted. On appeal, the Massachusetts Supreme Judicial Court agreed.

What Did the Court Decide?

The Court ruled that employers cannot automatically assume they are entitled to an injunction simply because they have a strong trade secret claim.

To obtain a preliminary injunction, an employer must show:

• A likelihood of success in the case.
• That it will suffer irreparable harm without the injunction.
• That the harm to the employer outweighs the harm the injunction would cause the other party.

The Court emphasized that irreparable harm must be proven separately. In other words, employers must show that the harm cannot be adequately fixed through monetary damages alone.  The Court noted that losses such as lost sales, contracts, or revenue can often be calculated and compensated financially. Because of this, those types of losses may not be enough to justify an injunction. 

What This Means for Employers

This decision highlights the importance of taking proactive steps to protect confidential business information before an employee leaves the organization.

Employers should consider:

• Reviewing confidentiality, non-solicitation, and restrictive covenant agreements on a regular basis.
• Ensuring employees understand their obligations regarding confidential information.
• Limiting access to sensitive business data when appropriate.
• Investigating suspected misuse of confidential information quickly and preserving evidence.
• Working with legal counsel to document how the misuse of trade secrets could cause harm that cannot be corrected through money damages.

Important Reminder

The Daikin decision reminds employers that courts will closely examine whether real, irreparable harm exists before granting an injunction. Strong agreements, clear policies, and prompt action remain some of the best tools for protecting confidential information and business relationships when employees leave an organization.