In a post-Alice world where patents will become harder to get, many organizations have a renewed interest in protecting innovative information as trade secrets, rather than publishing that information in a patent application. And of course, the first step in creating a trade secret is to keep the information secret in the first place. Thus, standard operating procedure at many organization is to require employees to sign confidentiality agreements, often coupled with post-employment restrictions (such as non-compete clauses and arbitration clauses for any disputes) as a condition of employment.
But while agreements that are tailored to protect true trade secrets are a good thing, overbroad agreements can create a host of problems. For instance, the National Labor Relations Board (NLRB) has now opened an investigation and administrative action against one of the largest hedge funds in the world for including provisions in its confidentiality agreements that require employees to keep all the terms of their employment confidential, prohibits disclosure of any employee lists or employee compensation information, broadly prohibits disparaging the employer or those associated with it and requires arbitration of all claims with a waiver of any right to a class action or other collective action. The NLRB contends that these clauses interfere with employees’ rights to collective action as protected by section 7 of the National Labor Relations Act. A copy of the complaint (and the employer’s answer) can be found here.
Separately, employers who rely on federal government contracts for any part of their income should also note that, as of October 25, pursuant to the Department of Labor’s Fair Pay Safe Workplace rules, predispute arbitration clauses (such as are found in many employment contracts and confidentiality agreements) are generally no longer permitted for employment discrimination claims. So while requiring confidentiality to protect what is truly a trade secret and valuable to the company is always a good thing, don’t be tempted to overdo it.
