New Defend Trade Secrets Act Requires Employers to Include Disclaimers in All Confidential Information Agreements

On May 16, 2016, President Obama signed into law the Defend Trade Secrets Act of 2016 (DTSA). The new law takes immediate effect and will provide important new federal protections against unauthorized disclosure of proprietary and confidential business information. However, one provision of DTSA immediately affects employers and other parties using confidential information and non-disclosure agreements with employees and independent contractors.

Section 1832 of DTSA requires that employees and contractors receive notice of whistle blower immunity from criminal or civil action based on certain protected disclosures of trade secrets. These circumstances include disclosure to a government agency or private attorney made in the course of a complaint regarding violations of law, and disclosure in a lawsuit, if the suit is filed under seal. This DTSA provision protects parties to non-disclosure agreements against their use to prevent or deter reporting legal violations.

Employers should immediately begin using the required immunity disclaimer in all new employment agreements, non-disclosure agreements and releases that include prohibitions against disclosure of confidential information. The law does not require the use of such disclaimers in agreements made with business entities. Employers may also reference a policy document as an alternative to providing the full immunity disclosure in each agreement.

The penalties for violation of this requirement are relatively minor, but persistent non-compliance could attract the interest of government agencies.

Jonathan Crotty

Jonathan Crotty

Jonathan Crotty has been a successful counselor and problem solver for large and small employers in the Carolinas and beyond for over 20 years. He heads Parker Poe’s Employment and Benefits practice group and represents employers in all aspects of the employment relationship, from hiring to discharge. Mr. Crotty provides guidance to employers as they navigate the complex array of laws and regulations applicable to the employment relationship, including employment discrimination laws, OSHA compliance, FMLA, and wage and hour matters. If employers face legal or administrative claims resulting from their employees and employment practices, he defends and resolves those disputes in line with the client’s goals and expectations.

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