Employment Law Alert : Gibbons P.C.: Labor Relations, Employment Contracts, Employee Benefits, & Wrongful Discharge Lawyers & Attorneys

The federal government continues to take aim at those who violate trade secrets rights. On December 28, 2012, the Theft of Trade Secrets Clarification Act of 2012 (S. 3642) became law, expanding the definition of trade secrets under the Economic Espionage Act (EEA). In addition, as previously reported in a Gibbons IP Law Alert blog, the President is expected to sign legislation recently passed by Congress that triples the damages for a violation of trade secrets protection laws and provides technical changes to patent applications and protections. Also worthy of note is an 82-page report from the U.S. Department of Justice issued last month detailing federal enforcement efforts concerning trade secrets theft.

Theft of Trade Secrets Clarification Act of 2012

The broadened definition of trade secrets as defined by the Theft of Trade Secrets Clarification Act of 2012 (“TTSCA”) makes clear that trade secrets protected by the EEA may be those merely “related to” a product or service used in or intended for use in interstate or foreign commerce, even if the trade secret itself is not used directly in such a product or service. In other words, protected trade secrets now encompass technical know-how that need not become part of a product or service. The TTSCA is Congress’ answer to a Second Circuit decision in United States v. Aleynikov on February 16, 2012, as previously reported in a Gibbons IP Law Alert blog. There, in reversing a jury verdict for the United States, the Court held that, although the defendant, a computer programmer, breached his confidentiality agreement with his employer, Goldman Sachs, when he misappropriated a proprietary computer code for the employer’s high-frequency trading system, he should have never faced criminal charges for his conduct under either the EEA or the National Stolen Property Act (“NSPA”). Specifically with regard to the EEA, the Court ruled that the defendant had not stolen trade secrets related to “a product made for the purposes of interstate or foreign commerce.” The Court similarly found that the defendant had not stolen a “good,” i.e.  tangible property, as defined by the NSPA. Critical to the Court’s ruling was that Goldman Sachs’ trading system supported by the stolen computer code was used internally and not in a product or service sold commercially. That the computer code was used by Goldman Sachs to generate trades in interstate and foreign commerce did not afford it protection under the EEA. As a result of the TTSCA, however, a theft such as the one that occurred in Aleynikov would violate the EEA.

Justice Department’s Summary of the Major U.S. Export Enforcement, Economic Espionage, Trade Secret and Embargo-Related Criminal Cases

The above-noted Justice Department report details the more significant and recent enforcement actions by Federal Government agencies against private individuals and companies. The report, called the “Summary of the Major U.S. Export Enforcement, Economic Espionage, Trade Secret and Embargo-Related Criminal Cases,” summarizes “cases resulted from investigations by the Department of Homeland Security’s U.S. Immigration and Customs Enforcement, the Federal Bureau of Investigation, the Department of Commerce’s Bureau of Industry and Security, the Pentagon’s Defense Criminal Investigative Service and other law enforcement agencies.” Many of these cases resulted in criminal penalties, probation and/or monetary fees. More of these cases are likely in light of the recent litigation.

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Over the past two years, the National Labor Relations Board (the “Board”) has attacked various employment policies of union and non-union employers alike, ranging from social media policies to policies that establish protocol for employees to follow when responding to media inquiries. The Board also has been critical of at-will language commonly found in employee handbooks and policies used by employers throughout the country. In light of the Board’s recent actions, some employers—particularly non-union employers that have not historically focused on Board developments—have begun to reassess policy language that has long existed in their handbooks. Due to a recent administrative law judge (“ALJ”) decision, employers should add employment agreements to their list of employment practices to review and Board developments to watch in 2013.

Last week, in Quicken Loans, Inc., No. 28-CA-75857 (N.L.R.B. A.L.J. Jan. 8, 2013), an ALJ upheld a challenge to confidentiality and non-disparagement provisions in an employment agreement distributed by an employer to its workers (mortgage bankers) nationwide. The ALJ concluded that the language “chilled” employees’ rights to engage in protected concerted activities in violation of the NLRA, despite the employer’s argument that the provisions were necessary to protect its investment in educating and training workers.

Language at Issue

The “Proprietary/Confidential Information” provision in the employment agreement prohibited employees from disclosing, among other things, “non-public information relating to . . . the Company’s business, personnel[,] . . . all personnel lists, [and] personal information of co-workers . . . such as home phone numbers, cell phone numbers, addresses and e-mail addresses” to “any person, business or entity.”

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On January 3, 2012, The National Labor Relations Board issued its decision in D.R. Horton, Inc. Case No. 12-CA-25764. This is a significant decision for all employers as it prohibits the use of class action waivers in employment arbitration agreements. Specifically, the Board held that arbitration agreements that contain provisions that prohibit employees from filing joint, class or collective claims addressing their wages, hours or other working conditions against their employer, in any forum, violate Section 8(a)(1) of the National Labor Relations Act (NLRA).

The arbitration provision at issue in D.R. Horton, Inc., required employees, as a condition of their employment, to agree that they would not pursue class or collective litigation of claims in any forum, arbitral or judicial. The Board found that the provision violated the Section 7 NLRA because it expressly prohibited employees from excising their right to engage in “concerted activities for the purpose of ... mutual aid or protection ..." The Board explained that courts and the Board have long held that Section 7 protects the rights of employees to bring legal action addressing their wages, hours, and working conditions, and that this right includes the right to bring employment-related claims on a class wide or collective basis. Notably, union and non-union employees alike are covered by the NLRA, and thus the Board’s ruling is applicable to virtually all employers.

The Board’s decision is surprising in light of the U.S. Supreme Court’s recent decision in AT &T Mobility v. Concepcion. In AT &T Mobility, the Supreme Court struck down a California law that prohibited class action waivers in arbitration agreements, holding that the Federal Arbitration Act (FAA) preempts state law. In its decision, the Board distinguished AT &T Mobility by stating that AT&T Mobility did not involve a right protected by the NLRA or even employment agreements. The Board further opined that AT&T Mobility involved a conflict between the FAA and state law, which is governed by the Supremacy Clause, and that the instant case involved two federal statutes. In addition, the Board held that its decision did not conflict with the FAA, and even if there was a direct conflict, “there are strong indications that the FAA would have to yield under the terms of the Norris-LaGurardia Act.”

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In the most recent issue of the New Jersey Labor & Employment Quarterly, Kelly Ann Bird and Zeenat Basrai analyze whether an employee can release claims under the Uniformed Services Employment and Reemployment Rights Act ("USERRA") as part of a separation agreement. The scant caselaw construing USERRA has resulted in confusion over whether USERRA claims can be waived, and if so, what language a waiver must include to be enforceable. The article discusses practical steps employers can take to protect themselves from an employee bringing a USERRA claim after signing a separation or settlement agreement, such as drafting the waiver using clear and unambiguous language and giving the employee sufficient time to review and consider the agreement before signing it.

Kelly Ann Bird is a Director in the Gibbons Employment Law Department.

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