Time for Employers to Amend their Confidentiality and Non-Compete Agreements

With the recent passage of the Defense of Trade Secrets Act (DTSA), all employers need to take another look at their confidentiality and non-compete agreements.  On the one hand, the DTSA now provides a federal cause of action for misappropriation of trade secret claims with more equitable relief along with compensatory damages, punitive damages, and attorney’s fees.  On the other hand, it grants immunity to employees (and contractors) who make a disclosure of a trade secret/confidential information to a government official or an attorney solely for the purpose of reporting or investigating suspected unlawful conduct.  In other words, and stated generally, an employee can take your company’s trade secrets/confidential information if their purpose in doing so is to report your company’s alleged misconduct.

In addition, the employer must provide notice of this immunity to its employees (and contractors) in their confidentiality and non-compete agreements or the agreement can cross-reference another policy document provided to the employee or contractor that addresses the notice requirements of the DTSA.  This notification requirement applies to agreements entered into or amended after the enactment of the DTSA.  The failure of the employer to include the required notice provision, will limit the legal remedies available to the employer if an employer determines that, in fact, an employee has misappropriated the employer’s trade secrets/ confidential information.

All businesses who use confidentiality and/or non-compete agreements should immediately consult with an employment attorney to discuss amending their current agreements.

-Scott Mirsky

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