New Disclosure Required In NDA’S

Recently, a passed statute concerning federal trade secret law, Economic Espionage Act, 18 U.S.C.A. Sec. 1831 (“EEA”), contained a section directed at immunity for whistleblower disclosures of confidential information. These certain areas of immunity are narrowly tailored and specifically directed at information disclosed for investigatory purposes. What is more important however is the notice requirement of this statute, requiring an employer to disclose these new immunity provisions whenever making someone sign an agreement limiting disclosure of information.

According to the new EEA law, there are essentially two areas in which immunity now exists. First, is disclosure of trade secrets in “confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney.” This information must be “solely for the purpose of reporting or investigating a suspected violation of law”. The same immunity exists if disclosure “is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.” Second, when an individual files suit for retaliation by an employer for reporting suspected violations of the law, that individual may disclose the trade secrets in the court proceeding. However, as with the first exemption, they must be filed under seal, and not disclosed otherwise.

There are few notable caveats to this law. First, by the plain text of the statute, this immunity only pertains to “liability for disclosure of a trade secret”. Trade secrets are information which has competitive value, is confidential, and for which the company has taken measures to keep it confidential. Any other information, such as unflattering information, or information without competitive value, would not be covered under this statute.

Therefore, any liability a whistleblower may have in contract would still apply, and not receive immunity under the EEA.

The crucial part of this new statute is the new disclosure requirements on employers. According to the statute:

“[a]n employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.”

This broad language encompasses more than just a traditional NDA. “Any agreement which governs the use of trade secret or confidential information” could include employment agreements, benefit agreements, or other contracts. Further, the term “employee” includes any individual performing work as a contractor or consultant for an employer. As such, it must be recognized this statute not only covers a broad range of agreements, but parties as well.

As for properly giving notice of these immunity provisions, an employer can either recite the immunity provisions in the document that the employee is signing, or by referring “to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law”. Basically, the provisions just must be provided to the employee at the time they sign an agreement concerning the disclosure of information. Failure to give this notice limits the remedies an employer can seek under EEA laws against an employee to whom these immunity provisions were not disclosed.

In conclusion, it would be prudent for employers to reassess their NDA’s and any other agreement they have parties sign that controls their disclosure of information. So long as the provisions are made known to the party signing at their time of agreement, the notice provision of this statue will be satisfied. As such, creating an addendum to an employee manual, or including the provisions in a document which can be cross referenced, would be an efficient strategy to comply with this statue without having to redraft all potential agreements.

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