Monthly Archives: July 2016

Maximize Your Options under the Defend Trade Secrets Act of 2016

Trade secrets are valuable. The owner of a trade secret must take reasonable measures to protect the trade secret. The reason measures can include limiting access on a need-to-know basis and the agreements put in place. For example, when an employer sues an employee for stealing a trade secret, the court will ask whether the employee signed a trade secret or confidentiality agreement. Not having an agreement would be a serious setback for the employer.

A well-drafted trade secrets agreement is useful, while a poorly drafted agreement can backfire. Anyone using those agreements should regularly review the agreements for updates. For example, in May 2016, the federal Defend Trade Secrets Act of 2016 (“DTSA”) became law. The DTSA opens the federal courts to more civil cases over trade secret misappropriation. The DTSA also imposes a notice requirement on employers. An employer that fails to comply with the notice requirement, when required, will limit what the employer could recover under the DTSA.

Employers that use trade secrets or confidentiality agreements need to have a notice of the whistleblower protections in the DTSA. The requirement applies to contracts entered into or renewed on or after when the law came into effect.  The employer also can comply by having the agreement cross-reference a policy document that has the required notice.  What is unclear is whether the notice can be a summary of the whistleblower rights, a repeat of the statute, or something else.

An employer that does not include the notice when required will not be able to get punitive/exemplary damages or an attorney’s fee award on a DTSA claim in a lawsuit against an employee. Regardless of whether state law or the contract covers that “gap,” it makes sense for an employer to include the notice when required to preserve as many options as possible.

It pays for an employer to review its agreements going forward for DTSA compliance, and to make sure the agreements still meets the employer’s needs. The recent DTSA gives employers and others an excuse to review their agreements.

We are happy to assist employers and others with their policies, procedures, and agreements. Feel free to give us a call.

This post provides general information only. This post is not intended to create an attorney-client relationship or to be legal advice about your situation. Laws change and your situation may be different. You should consult with a licensed attorney for legal advice specific to your circumstances.

© 2016 Matthew D. Macy

An Overtime Bedtime Story

Wynken, Blynken, and Nod formed the Wooden Shoe Company to build custom fishing boats.  They are both owners and employees of the company.  A debate erupted between them whether they would be exempt from overtime as business owners.  The boys called the lawyers at Goldnet, Silvernet & Moon to answer the question.  This is what they learned.

Under the federal Fair Labor Standards Act (“FLSA”), a business owner qualifies for the “white collar” exemption to overtime as an executive employee, regardless of the amount of salary, if: (1) the employee owns at least a 20% bona fide equity interest in the business; and (2) the employee is actively engaged in the management of the business.  “Actively involved in management” is considered on a case-by-case basis.

Wynken, Blynken, and Nod applied the test to their situation.  All three boys had bona fide equity interests in the company, and they all met the requirement to be actively involved in the management of the company.  Wynken owned 50% of the company, Blynken owned 40%, and Nod owned 10%.  Wynken and Blynken qualified for the business owner exemption.  Nod, however, did not qualify for the business owner exemption because he owned less than 20% of the company.  The boys then checked whether another exemption applied to Nod.

What is the takeaway?  Just owning any percentage of the business will not automatically exempt the employee from overtime.  There is an ownership minimum and a requirement to be involved in management.  All may not be lost if the owner-employee does not qualify for the business owner exemption.  Another exemption could apply; otherwise, the owner-employee is eligible for overtime.

Employers also should remember that state laws could expand eligibility for overtime beyond the rules under the FLSA.   Please contact us if we can be of assistance.

This post provides general information only.  This post is not intended to create an attorney-client relationship or to be legal advice about your situation.  Laws change and your situation may be different.  You should consult with a licensed attorney for legal advice specific to your circumstances.

© 2016 Matthew D. Macy