The DTSA Becomes Law: Impact on Employee Confidentiality Agreements


On Wednesday, May 11th, President Barack Obama signed into law the Defend Trade Secrets Act (18 U.S.C. §§1831 – 1839, 1961). Among other things, the new law creates an opportunity for companies to enforce trade secret laws in federal court, as well as provides enhanced remedies in the event of a finding of misappropriation. More details on the new law can be found in our previous alert which reviews key provisions and suggests that now is the time for companies to review their trade secret protection programs.

Of even more immediate importance to employers, perhaps, are the DTSA's immunity notice provisions for employees, which employers should consider adding to certain employment agreements and/or policies now.

The DTSA provides that an employee shall not be held criminally or civilly liable for the disclosure of a trade secret that is made “in confidence” to a government official or an attorney if the trade secret is disclosed solely for the purpose of reporting or investigating a suspected violation of law. Similarly, an individual who files suit for retaliation stemming from the employer's suspected violation of the law may disclose a trade secret to legal counsel and in a court proceeding, provided the individual takes appropriate measures to keep the trade secret confidential, including filing under seal.

The new law mandates that employers provide notice of the immunity provisions of the law in any employee agreement that governs the use of a trade secret or confidential information, or by referencing a policy document provided to the employee that describes the employer’s reporting policy for a suspected law violation. If an employer does not comply with the notice requirement, the employer is precluded from receiving exemplary damages or attorneys’ fees under the DTSA in an action against an employee for trade secret misappropriation. The new rules apply to all employee contracts or agreements entered into or updated after the effective date of the law. While an employer that does not provide the notice still can avail itself of the DTSA's other protections, as well as those provided by state statutes and common law governing misappropriation of trade secrets, the additional remedies made available by the DTSA warrant consideration of whether and how to provide the required notice to employees.

If you would like more information about the Defend Trade Secrets Act or how a trade secrets audit can help you, please contact Emily Feinstein at 283-2470, Jonathan Hudis at 372-9528, Sean Scullen at 277-5421 or your Quarles & Brady attorney.

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