Practice Areas
The Defend Trade Secrets Act Requires Employers to Update Agreements in Order to Receive New Federal Remedies
By: JAMES M. REID

In order to take advantage of a new civil cause of action for trade secret misappropriation under federal law for agreements signed after May 12, 2016, the Defend Trade Secrets Act (the “Act”) requires employers to make certain disclosures to employees, contractors, and consultants. The Act grants civil and criminal immunity to individuals who disclose trade secrets in the course of whistleblowing.

What Disclosures are Required?

Essentially, whistleblowers need to be notified of their ability to disclose trade secrets necessary to report a suspected violation of law to a federal, state or local governmental official or counsel. In addition, trade secrets could be disclosed in a complaint (such as a complaint for retaliation) if the filing is made under seal. If employers do not make the foregoing disclosures, they will be unable to recover exemplary damages or attorneys’ fees under the Act.

How Should Employers Comply with the Act?

First, Employers should identify all documents that contain confidentiality provisions which may include, without limitation, employment agreements, independent contractor agreements, handbooks, confidentiality agreements, non-disclosure agreements, and separation agreements.

Second, Employers should update the foregoing documents to specify (at a minimum) that whistleblowers have immunity and cannot be held criminally or civilly liable for disclosing trade secrets (or other confidential information): (1) to a federal, state, or local government official; or (2) in a complaint that is filed under seal. Likewise, employers should reiterate that they will not retaliate against or interfere with employees making such disclosures.

The exact language will vary based upon the documents being amended. In order to ensure compliance with the Act, employers should seek the advice of an employment attorney.

This article was written by JAMES M. REID, a shareholder of the law firm of Maddin, Hauser, Roth & Heller, P.C. located in Southfield, Michigan. He can be reached at (248) 351-7060 or jreid@maddinhauser.com