Employers Need to Review Non-Disclosure Agreements in Light of New Florida and Federal Trade Secret Laws

Trade Secret LawsEmployers will need to review non-disclosure provisions of contracts and Confidentiality Agreements in light of the newly-enacted Federal Defense of Trade Secrets Act and recent amendments to Florida Law.

Federal Law

In May, the Defense of Trade Secrets Act (“DTSA”) was signed into law and immediately took effect. The DTSA creates a federal legal scheme for the protection of trade secrets. Previously, protection of trade secrets was left to state law.

Because confidentiality agreements might have the effect of discouraging employees from reporting their employer’s wrongdoing to the government, the DTSA provides for civil and criminal immunity to whistleblowers under state and federal law for disclosing confidential or trade secret information to the government as part of whistleblowing activity.

The DTSA requires employers to provide notice of whistleblower immunity in any agreement that governs the use of a trade secrets or other confidential information. This notice requirement can be satisfied by including notice in the agreement itself, or by explicit cross-reference to an employer’s policy document (such as an employee manual). If an employer fails to provide employees with notice of whistleblower immunity, and the employer later has to litigate against an employee for misappropriation of trade secrets under the DTSA, the employer cannot recover any attorneys’ fees or exemplary damages which it might otherwise be entitled to for such misappropriation.

Employers should review confidentiality agreements and policy documents to ensure they contain the appropriate notice language  .

Florida Law

You should also be aware of recent changes to Florida law that exempt financial information that is a trade secret from mandatory disclosure under Florida’s Sunshine Laws. These changes take effect on October 1, 2016.

Florida’s amended criminal trade secret law, § 812.081 Fla. Stat,, now expressly includes “financial information” as an example of a trade secret not subject to mandatory disclosure. The amendments stand for the proposition that government transparency under the Sunshine Laws should not cost a private company its trade secrets.

The Florida Legislature did not make corresponding changes to the definition of “trade secrets” under Florida’s Uniform Trade Secret Act, § 688.001, et seq., Fla. Stat. (the “UTSA”). This leaves open for the determination of the courts the question of whether financial information is considered a trade secret in the civil context. Further, the Florida legislature failed to clearly define “financial information,” leaving the statute open to further judicial interpretation.

It is clear that certain confidential financial information does not rise to the level of a trade secret. To be considered a trade secret, financial information has to meet all of the criteria set out in § 812.081, specifically: it must be secret; it must be of value; it must be for use or in use by the business; and it must be of advantage to the business, or providing an opportunity to obtain an advantage, over those who do not know or use it when the owner thereof takes measures to prevent it from becoming available to persons other than those selected by the owner to have access thereto for limited purposes.

Companies doing business in Florida should consider including “financial information” in any contractual definition of “trade secrets” or “confidential information.”

If you have questions regarding how these new laws affect your business, please call us at 407-792-0790.

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