Trade Secret Protections
Author: Melissa A. Silver, XpertHR Legal Editor
The new Defend Trade Secrets Act (DTSA) standardizes and strengthens employers' legal remedies and protections by allowing an employer to file a private cause of action in federal court for trade secret misappropriation. Prior to the DTSA, employers were left with a patchwork of state laws providing trade secret protection and a limited ability to file a claim in federal court to safeguard their trade secrets.
Employers can reap the benefits of this new law with these steps.
1. Understand the Type of Information Protected and Remedies Available
The DTSA defines the type of information that is protected and the remedies available to an employer if the employer's trade secrets are misappropriated. Employers need to understand the law in order to take advantage of the law's benefits. To that end, employers should review how it affects their employment practices in the following areas:
- Workplace security;
- Employment contracts, particularly restrictive covenants;
- Employee communications;
- Employee discipline;
- Liability concerns; and
- Employee handbooks and policies.
2. Update Employment Contracts, Policies and Handbook Statements That Contain Nondisclosure Clauses
A unique provision of the DTSA is that it provides immunity to whistleblowers who reveal a business's trade secrets to a government official or his or her attorney regarding a suspected violation of law. Under the DTSA, an employer is required to provide notice to employees about this immunity in its nondisclosure or confidentiality agreements entered into on or after May 11, 2016. Employee is defined to include independent contractors and consultants.
An employer is considered to be in compliance with the notice requirement if it provides a cross-reference to an employer's reporting policy or handbook statement that is provided to the employee. If an employer fails to provide notice, it may not be awarded exemplary (punitive) damages or attorney fees in an action against an employee to whom notice was not provided.
As a result, employers should update the following documents to include the DTSA's whistleblower immunity notice:
- Employment Contract Form;
- Independent Contractor Agreement;
- Nondisclosure Agreement;
- Nondisclosure of Confidential Employer Information Contract Clause;
- Confidential and Proprietary Information Policy;
- Confidential Company Information Handbook Statement;
- Intellectual Property Policy;
- Whistleblower Policy; and
- Reporting and Anti-Retaliation Policy Handbook Statement.
3. Train Supervisors
Supervisors need to be trained about:
- The type of information that constitutes a trade secret and the protections that are now available in the event an employee misappropriates confidential proprietary information;
- The immunity to which employees are entitled if a trade secret is disclosed to certain individuals when reporting a suspected violation of law;
- Safeguarding trade secrets and confidential information and incorporating these protections into the employer's Bring Your Own Device, Personal Electronic Devices, Communications and Information Systems, and Blogging policies;
- Protecting trade secrets when employing a mobile workforce and telecommuters;
- Communicating to new hires not to use the trade secrets or confidential information of a former employer; and
- Retrieving any trade secret information from departing employees.