What do employers need to know about the new Trade Secrets Act of 2016?

Small business tips - SandGarden Law GroupThe new Trade Secrets Act of 2016 has new tools and remedies for protecting employers, and new notice requirements as well.

Previously in this series we’ve discussed the new Defend Trade Secrets Act of 2016 (DTSA); how it can help small business owners and entrepreneurs protect their Trade Secrets, and how it will affect every else doing business in California. (See our resources page to links to these posts.)

Today’s blog post will focus on what employers need to know about the DTSA and steps they should take to comply with new DTSA requirements.

Today’s employers, small businesses and startups included, understand that they are vulnerable to their employees and contractors. Right from the beginning of the hiring or contracting process candidates will learn about the company’s data, tools, and developing projects. As the employee or contractor works longer for the company, they are trusted with key confidential information: intellectual property, trade secrets, deals in development, supply chain knowledge, etc. Most prepared and professional companies do their best to mitigate these risks by using non-disclosure agreements (NDAs) and Employment or Independent Contractor Agreements with confidentiality and IP clauses.

With the new tools that the DTSA provides (discussed in previous posts), it is more important than ever that employers make sure that they have NDAs and use tailored Employment or Independent Contractor Agreements.   For those companies that already use them, make sure that you’re NDA and Agreements are all updated to take advantage of the new tools the DTSA provides.

But it is important to update all your NDAs and Agreements for another reason. The DTSA not only has new advantages to employers, it has new requirements as well.

When Congress decided to strengthen the protections for businesses with the DTSA, they did not want to do so at the expense of employees or contractors trying to protect the public by disclosing illegal or dangerous actions by rogue companies.   Because of that the new DTSA contains special Whistleblower protections and notice requirements.

Basically, if your company uses any contract restrictions (such as NDAs or Employment or Independent Contractor Agreements), which you should, the contracts must also contain a notice that the DTSA protects Whistleblower activities. No person who breaks confidentiality for the purpose of reporting illegal activities to the government can be prosecuted under the DTSA, even if that person violated their contract to disclose or report the information. The DTSA does not require you to go back and change already existing contracts; the strict requirement is only for new contracts going forward. But it is recommended that small businesses consider implementing the changes as soon as possible in order to also take advantage of the new tools and protections of the DTSA as well as complying with the notice requirement.

Be sure to get good legal advice as to how the new Whistleblower notice clause should be implemented in the specific NDA and confidentiality provisions your company uses in all of the different types of documents you have to protect your confidential information and IP. Don’t use templates or boilerplate.

If you have questions, ask us at SandGarden Law.

SandGarden Law Group of Sunnyvale, CA provides creative and accessible legal solutions for individuals, families, and small businesses.

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