How New Federal Trade Secrets Legislation Could Affect New Jersey Employment Law

confidential documentIn order to remain competitive in the marketplace, most businesses rely on keeping certain types of information confidential. These might include client lists, sales leads, or computer algorithms, to name but a few. Employees often have access to information that an employer considers proprietary or otherwise secret. State laws protecting trade secrets may affect employees during and after their employment relationship. New federal legislation, the Defend Trade Secrets Act (DTSA) of 2016, Pub. L. 114-153 (May 11, 2016), expands federal courts’ jurisdiction over trade secret matters, and it could have an impact on employees in New Jersey and around the country.

Until the DTSA came along, no uniform standard for trade secret protection applied across the country. New Jersey law defines a “trade secret” as information that has value specifically because it is secret and that has been “the subject of efforts…to maintain its secrecy.” N.J. Rev. Stat. § 56:15-2. This definition is consistent with most state statutes and existing federal law. See 18 U.S.C. § 1839(3).

New Jersey’s trade secrets law prohibits the “misappropriation” of a trade secret, defined to include the acquisition of secret information by a party who knows of its confidential nature, and the disclosure of such information without permission and with knowledge of its secrecy. N.J. Rev. Stat. § 56:15-2. It allows state courts to grant injunctions to prevent “actual or threatened misappropriation.” Id. at § 56:15-3. It also allows the recovery of damages for actual losses and unjust enrichment resulting from misappropriation. Id. at § 56:15-4.

Employers often worry, not entirely unreasonably, that employees might misappropriate trade secrets, but their efforts to prevent misappropriation must not violate employees’ and former employees’ rights. Nondisclosure agreements are a common feature of employment contracts when trade secrets are at issue. The protection of trade secrets may also be a factor in some covenants not to compete. This is an agreement that an employee will not seek or accept employment with a competitor located within a defined geographic area for a specified period of time after ceasing employment with the employer.

The main effect of the DTSA on employees who are subject to a trade secret misappropriation claim is that, under certain circumstances, the federal court system has jurisdiction. This applies when the alleged misappropriation affects interstate or foreign commerce. The DTSA allows private causes of action for injunctive relief and damages, similar to the provisions of New Jersey and other state laws. Otherwise, the statute expressly states that it does not preempt existing state laws regarding trade secrets or covenants not to compete. Pub. L. 114-153 § 2(f), 18 U.S.C. § 1838.

The DTSA provides immunity from criminal and civil liability to whistleblowers, meaning employees who disclose trade secrets to a government official or agency as part of a report of suspected unlawful activity. It also immunizes an employee from liability for disclosing trade secrets to their legal counsel in a claim for retaliation. Employers must provide employees with written notice of these rights as part of any nondisclosure agreement. 18 U.S.C. § 1833(b), as amended by Pub. L. 114-153 § 7(a).

If you need to speak with an employment contract lawyer in New Jersey or New York, contact the Resnick Law Group online, at 973-781-1204, or at 646-867-7997.

More Blog Posts:

New Jersey Appellate Court Invalidates Arbitration Clause in Employee Handbook, The New Jersey Employment Law Firm Blog, April 1, 2016

Non-Competition Agreements Under New Jersey Law, The New Jersey Employment Law Firm Blog, November 20, 2015

Sandwich Chain Reportedly Requiring Employees to Sign Non-Competition Agreements, The New Jersey Employment Law Firm Blog, November 12, 2014

Photo credit: geralt [Public domain, CC0 1.0], via Pixabay.

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