The Defend Trade Secrets Act (DTSA) is a federal law that provides important protections for both employers and employees regarding the handling of confidential business information, commonly known as trade secrets. Many separation agreements include a specific provision to inform employees of their rights and responsibilities under this law.
What Is the Defend Trade Secrets Act?
The DTSA allows individuals to disclose an employer’s trade secrets without facing criminal or civil liability, but only under certain circumstances. This is designed to encourage the reporting of suspected legal violations while still protecting the employer’s confidential information.
When Is Disclosure Protected?
Under the DTSA, an employee can disclose trade secrets without fear of legal consequences if:
- The disclosure is made confidentially to a federal, state, or local government official, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or
- The disclosure is made in a legal complaint or other document filed in a lawsuit or other proceeding, provided that the filing is made “under seal” (meaning the information is kept confidential by the court).
What Happens If Disclosure Is Not Protected?
If an employee discloses trade secrets for reasons other than those allowed by the DTSA, or does so in bad faith (for example, to harm the employer or for personal gain), the employee may be held liable for substantial damages. This can include punitive damages (extra damages meant to punish wrongful conduct) and the employer’s attorney’s fees.
Key Takeaways for Employees:
- You are legally protected if you share trade secrets with government officials or your attorney to report suspected wrongdoing, or if you disclose them in a lawsuit under seal.
- Any other disclosure of trade secrets, or disclosure not made in good faith, can result in serious legal and financial consequences.
Why Is This in Your Separation Agreement?
Employers include this provision to ensure employees understand both their rights to report illegal activity and their ongoing obligation to protect the company’s confidential information. It also serves to comply with the DTSA’s requirement that employees be notified of these protections.
Conclusion
If you are considering disclosing information you believe may be a trade secret, it is important to ensure your actions fall within the protections of the DTSA. When in doubt, consult with an attorney to avoid unintended legal exposure.
