Employment, Confidentiality and Non Disclosure Agreements: What All Employers Need to Know About the Federal Trade Secret Law

On May 11, 2016, President Obama signed a new federal trade secret act into law. The Defend Trade Secrets Act (“DTSA”) amends the prior Economic Espionage Act of 1996, by providing private companies a federal cause of action for trade secret misappropriation occurring after May 11, 2016. Following implementation of the DTSA, it is essential that employers take note of several new mandates, which include providing Notice provisions in all contracts governing the use of confidential information and trade secrets.

Prior to the implementation of the DTSA, a number of states have provided protection for trade secrets by implementing the Uniform Trade Secret Act (“UTSA”), including Colorado. The enactment of the DTSA does not eliminate or preempt those remedies available under state law, but rather acts as a supplement to the UTSA and expands the reach of trade secret protection and regulation.

Perhaps some of the most important changes provided by the DTSA include:

1.   The DTSA now provides companies the ability to avail themselves to the jurisdiction of the federal courts. Before the DTSA was enacted, employers would need to meet stringent federal jurisdiction requirements of diversity in order to file suit in federal court for trade secret misappropriation.

2.   Both the UTSA and DTSA provide employers with a number of remedies against an employee who has misappropriated trade secrets, which include actual damages, punitive damages, and the recovery of reasonable attorneys’ fees and costs. Under the DTSA, employers can additionally seek the extraordinary remedy of ex parte seizure in certain circumstances.

3.   The DTSA contains immunity and anti-retaliation provisions intended to protect individuals who may need to disclose trade secrets.

4.   With new immunity and anti-retaliation provisions, employers must provide specific Notice of these provisions to employees, independent contractors, and consultants in all agreements pertaining to confidential information and trade secrets entered into on or after May 11, 2016.

Of all changes provided by the DTSA, perhaps the most essential for employers to take note of is the required Notice provisions for contracts. Notice must be provided in an expansive number of contracts, which may include employment agreements, independent contractor agreements, consulting agreements, non-compete and NDAs, severance agreements, and employee handbooks.