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Dan Isard

By: Dan Isard

Secrets in the Funeral Home Business

Many facets of your business are confidential, including credit card and Social Security numbers of the deceased, the names of families served and all prearrangement business relationships.

Dear Dan,
The craziest thing has been happening. I own a 180 call business with two rooftops. I run one location and my manager of 10 years runs our second location that is 15 miles away. Two weeks ago he tendered his resignation. He did not give me a reason for his departure. He did not answer any questions about what he was going to do or if he was leaving funeral service. Last week, I heard at a Rotary meeting that he bought a building and is working to open a funeral home. Yesterday, I started receiving calls from several of my Preneed families who have received a letter from him announcing his new venture. He also told them they can transfer their preneeds to his new business. Can he do this?
Signed, Et Tu Brute?

Dear Julius Caesar,
You ask one question but there are two questions there. Can he do this? Well, he did, didn’t he? The more direct question is “Can he legally do this?” The answer to that is an essay.
Julius, you don’t say in your note if you had an employment agreement. The reason that is a factor in the resolution is that employment agreements usually have provisions which enunciate:

  • What happens upon a termination of employment, regardless of it being by resignation or firing?
  • What happens if the former employer wants to be re-employed within the service area?
  • What property of the employer is deemed to be confidential?

Most states have passed a series of laws that are referred to generally as “Business Unfair Practices Act”. The terms and conditions are not uniform as state legislatures modified this as they saw fit. Typically these laws help a business owner keep matters that are important to the success of their business confidential. For example, the identification of their patrons is a confidential matter.

Julius, I think that your consumers; past, present and future fall into this category of secrecy. Anyone that gains access to your preneed list through any means is essentially committing a theft of your goodwill. You should sue them. You can have your lawyer take very aggressive action and try for an injunction to stop the efforts of this theft.

I was retained as an expert on a case in New Jersey where a person opened up a new funeral home 1.1 miles from their previous employer. They mailed 89 letters announcing their new business and encouraging recipients to transfer their preneed from the owner’s former employer. I testified that 86 of the 89 people receiving this letter were preneed policyholders of the firm he left. The judge could not believe this and asked the new business owner, “How did you pick 86 preneed policy holders to get this letter?” The former employee said, “Gee your Honor, it must be a coincidence!”

There are many items in your business that are confidential. Some deal with the information of the deceased. Credit card numbers, Social Security numbers and even date of birth of the deceased or anyone within the arrangement must be protected. The names of the families you have previously served are also confidential. Furthermore, information on the families that you are in a prearrangement business relationship with is a critical confidential item.

This past spring, Congress passed the Defend Trade Secrets Act of 2016. The law has several key points to it. The law simply states, “An owner of a trade secret that is misappropriated may bring a civil action under this subsection if the trade secret is related to a product or service used in, or intended for use in, interstate or foreign commerce.” Now, we must define “misappropriated” and “trade secret”.

Several years ago an upstart water bottle delivery company was trying to make a market impact against their competitor. To do this they had someone follow each truck on its route and record the addresses the truck stopped at. The upstart now had the list of consumers using the established provider. The courts ruled that the list of their customers, no matter how it was gained by the upstart, even if the actions were in the public eye, was a theft of a trade secret.

Clearly trade secrets can be the blend of 17 spices a chicken fryer might add to their flour or the existing and prospective clients that someone has the expectation of serving. In another case I was an expert to help explain to the courts the relationship of preneed accounts and the funeral home that wrote them. A new company was trying to convert the preneed families having secured a list of them that had been left out on the owner’s desk. Their defense was that if it was a trade secret it would be under lock and key. I agreed that the list should have been securely saved in a filing cabinet or a desk drawer but that didn’t diminish the expectation of service the funeral home had when they solicited these consumers. The court agreed with my point of view.

The parties benefiting from this theft could be the new employer or partner of the thief. For example, if Tom steals my data and goes to work for Fred, Fred is not innocent if he acts on the stolen information given to him by Tom. Often enforcement of the trade secret requires suing the new employer or enterprise in possession of the list. Not more than two weeks ago a client stopped a new employee on their way home and found the employee was carrying a copy of the list of the preneed policyholders! The employee stated they wanted to memorize the list in case a death occurred so they could be more efficient in handling the first call. My client accepted the employee’s resignation on the spot.

The identification of items deemed to be a trade secret is determined by the employer. Make a list of everything you deem a trade secret. List it in your employee handbook. Have everyone sign the employee handbook before their hire. Have a training day for existing employees to discuss this list and present it to them. Have them sign for the receipt of the list. Save their signed acknowledgement into their employee file. This applies to full time and part time.

What about contractors? The preneed sales person you have now may want to work off of the existing list. They may want to add new products or services to some of the preneed consumers. That is a great idea. However, they should sign a confidentiality agreement as part of their agreement as a contractor.

The last thing you want is a situation like that which happened to a client in Florida. My client hired a preneed sales person. The sales person wrote lots of business over two years and then their production slowed down. When their production slowed, the funeral home terminated their agreement. However, this preneed sales person was smarter than the average person. He kept a list of every sale. He went to the other funeral home in town and offered to write business for them. He got a commission for every consumer he was able to swing over to them, even if they were already funded for his first funeral home employer. After about 50 contracts had been switched over, my client finally figured it out. Lawsuits rained down.

The world is changing. Being a spy is not like the James Bond era where you need a small camera. So much data is sent via e-mail, and often multiple parties of an e-mail get the same confidential information. Every business owner should ask themselves, what happens if this person who is copied on the e-mail changes their allegiances. Will that person respect they are in possession of your confidential information. The fact you gave it to them or access to it does not negate the fact it is your property and it is confidential. My advice is to always error on the side of caution.

So, my dear Julius, take aggressive action. Use a litigation attorney not a real estate lawyer. Move quickly as the public doesn’t want to get involved in your litigation.

Dan Isard, MSFS, is president of The Foresight Companies LLC, a Phoenix based business and management consulting firm specializing in mergers and acquisitions, valuations, accounting, financing and consumer surveys. Isard can be reached at 800-426-0165 or For copies of this article and other educational information, visit

The financial and tax advice contained in this article is for informational purposes only and may or may not apply to your individual position. Readers are strongly encouraged to seek the counsel of qualified advisors before undertaking any action based on this information.

Finance 101 November 2016

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