In 2018, IBM’s Chief Diversity Officer Lindsay-Rae McIntyre left the company with plans to start a similar position at Microsoft. IBM, in turn, responded by taking the woman who had been one of their top female executives to court.
Like many employees in the tech industry, McIntyre had a non-compete agreement IBM sought to enforce it and argued that, even if the non-compete was unenforceable, McIntyre should still be prohibited from taking the job because she would “inevitably” disclose trade secrets.
McIntyre was a human resources leader with no technical training. The trade secrets in question weren’t about products or services; rather the company was concerned about their diversity data and strategies becoming known and used to Microsoft’s advantage.
Although IBM settled the suit and McIntyre was able to start working at Microsoft, the case raised many questions about the use of trade secret theory to conceal diversity information. IBM is not the only technology company that has argued for protecting its organizational diversity data and strategies as trade secrets. Microsoft, Apple, and Google have all done the same.
One might argue that placing high value on diversity through a trade secret framework sounds like a positive development. However, my research suggests that this approach ultimately harms diverse talent, hinders transparency and accountability, and limits the potential of diversity efforts to advance workplace equity.
Diversity as a Trade Secret
Generally, businesses rely on trade secrecy doctrine to protect intellectual capital in order to safeguard inventions, spur innovation, and maximize the economic benefits of their work. Think of the famous examples: the Coke formula, Google’s algorithm, or McDonald’s special Big Mac sauce.
After Congress passed the Defend Trade Secrets Act in 2016, which strengthened employers’ ability to protect their information, trade secret lawsuits increased by 30%. Employment law firms have driven much of the litigation, as companies sue current and former employees for disclosure of secrets. Not only have lawsuits gone up, but the notion of what may be considered a “trade secret” has also become broader. I’ve found that recently, companies, particularly in tech, have started arguing to protect their diversity information as a trade secrets. And this has significant implications for employees.
Because tech companies continue to face criticism for the lack of diversity within their workforces, maintaining that information related to their diversity is a trade secret (part of the “secret sauce” that keeps them competitive) and cannot be disclosed, sounds like an unusual, even suspicious, legal argument. The tactic seems to be aimed more at avoiding bad publicity than remaining competitive.
Restricting employee mobility. As we saw in IBM’s suit against McIntyre, this argument has been leveraged to restrict mobility of talent. IBM seemed to present an extreme version of the business case for diversity. That is, information related to the status of women and racial minorities is so valuable to competitiveness, that the company will suffer if that information gets in the hands of competitors.
This argument views inclusion as a zero-sum game, in which a company’s economic gains from diversity are achieved and perpetuated only by keeping diverse talent and “secrets” away from others. But this view will harm diverse talent if it is used more broadly. Women and people of color disproportionately occupy diversity-related roles and thus are more likely to suffer the career consequences of restricted mobility.
Interestingly, these arguments have not been applied to restricting employees from other HR positions outside of the diversity realm, even though they most likely have access to the same employee information and talent development strategies.
A lack of transparency. The evolution of the diversity-as-trade-secret legal strategy goes well beyond enforcement of non-compete agreements. Overwhelmingly, it is tied to tech companies’ refusals to divulge diversity data, information that they might find embarrassing should it become public.
Over the past 10 years, various stakeholders, including local and national media outlets, members of Congress, diversity advocates, and social justice organizations have been mobilizing to raise awareness about tech’s lack of diversity. This has involved reaching out to tech companies to request diversity data and submitting a slew of Freedom of Information Act (FOIA) requests to the government to request access to this routinely collected information.
For example, in 2011, CNN filed FOIA requests to the U.S. Department of Labor and the Equal Employment Opportunity Commission to gather information on race and gender representation from 20 tech companies. Apple, Google, Hewlett-Packard, IBM, and Microsoft all submitted written objections stating that the release of their employment data would cause a “competitive harm” under trade secret law. Amazon, Facebook, Groupon, Hulu, LinkedIn, LivingSocial, Netflix, Twitter, Yelp, and Zynga also dodged sharing their diversity numbers. (Some of these companies have since provided minimal information through voluntary reporting on a sporadic basis.)
This lack of transparency matters because without relevant information on workforce demographics, employment trends, and strategies being used to increase diversity, it is nearly impossible to fully assess the problem and propose more effective solutions.
Despite greater calls for diversity, a large majority of tech companies continue to staunchly refuse to publish diversity data. In 2018 Reveal from The Center for Investigative Reporting filed FOIA requests to the Department of Labor for the EEO-1 reports of several tech companies that qualify as federal contractors. The Department responded by asking the companies if they would like to object to the request, and then providing instructions for how to invoke the trade secret argument.
Several companies took advantage of the opportunity: Oracle, Palantir, Pandora, PayPal, Gilead Sciences, Splunk, and Synnex each claimed that their diversity statistics were trade secrets. (PayPal has since released its data.) Reveal has since filed a lawsuit against the Department of Labor, which is currently pending in the U.S. District Court for the Northern District of California. The pressure from Reveal and other external stakeholders has been somewhat successful, resulting in small steps toward greater transparency along the way.
And some companies have been more forthcoming, voluntarily disclosing diversity data and strategies. For example, when CNN first reached out to those tech companies in 2011, only three were willing to share. Intel was the outlier at the time, providing data on its employment diversity on its public website before being asked. Its Chief Diversity Officer told CNN:
Intel believes that transparency with our data is the best way to have a genuine dialogue….We are tech companies and data drives our business; we need to get beyond our fears that the numbers are a poor reflection on our individual organizations and work together to address the issues collectively.
Intel has been consistent with this transparency, recently releasing a report on October 29, 2018 summarizing its progress toward diversity goals across levels of the company. Although other tech companies have released snippets of data and glimpses into strategies, few have followed suit in a consistent and comprehensive way that would be useful to external stakeholders.
Preventing accountability. Companies have also used the trade secret argument to avoid having to disclose diversity-related information when former employees have requested it in discrimination lawsuits.
For example, in a pending sex discrimination lawsuit, Moussouris v. Microsoft, Microsoft fought to keep all documents and data related to diversity sealed, arguing that publicizing this information could allow competitors to unjustly access their diversity initiatives and use them against Microsoft. The company also contended that their diversity data could be misconstrued by “outsiders [making] uninformed conclusions about the [data’s] cause, meaning, or significance” which would in turn harm its business interests. Ultimately, Microsoft’s argument prevailed, and the contested information was sealed from public view.
How Transparency and Accountability Can Promote Equity
It is difficult to imagine how workforce numbers secure a company’s competitive advantage in a way that needs to be protected by trade secret law. Instead, these efforts to withhold diversity information seem to be more about reputational harm – an objective that should never come under the purview of trade secret law.
Whether specific diversity strategies are trade secrets warrants more of an analysis. If these strategies do in fact provide economic gain to the company – and the company will suffer if the ideas are stolen – maybe this argument fits. However, it is impossible to evaluate whether the strategies are indeed yielding diversity and commercial gain without first having data to assess the related diversity and economic outcomes.
Instead of hiding demographics and inclusion strategies, companies that are truly committed to diversity, should make this information available to the public. The U.S. government agencies responsible for enforcing equal opportunity law can aid in this pursuit by openly publishing more of the information it collects.
For example, diversity stats and strategies for meeting diversity goals are already collected by the DOL for all federal contractors. Making this information publicly available would help other companies learn more about what is and isn’t working across industries. This increased awareness may also enhance accountability and motivate companies to invest in more effective programs, rather than only talking about diversity and taking symbolic strides.
Although this policy has been hotly debated, it isn’t unprecedented. A recently passed UK law began requiring all companies with over 250 employees to report and publish statistics on gender pay equity.
This type of open model would be a step toward facilitating collaboration on diversity goals, getting organizations to view diversity and inclusion as a shared pursuit, rather than as simply another way to compete. Not only will this increase accountability for action, but it may also be a faster way to foster innovation and progress.
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