New Federal Law Protects Trade Secrets But Also Requires Changes to Employee and Contractor Agreements
By: Sandra E. Kahn
The new Defend Trade Secrets Act of 2016 (DTSA) is expected to be signed into law by President Obama. The Act will allow claims for trade secret theft to be brought under a federal civil cause of action.
Under certain circumstances, the Act will provide protection for whistleblowers who divulge trade secrets to the government in order to report wrongdoing. As such, employers will now have to inform their employees of that protection in any agreement or contract. It is advised that employers consult with their counsel to revise contracts as necessary.
For a more detailed explanation of the DTSA, read the full post on our Good Company blog.
As music and beer flow freely this St. Patrick’s Day, employers have good reason to be aware of what “shenanigans” their employees may be up to.
Employers already know that sexual harassment in the workplace is illegal and can result in liability, but employers should also know that under some circumstances sexual harassment outside of the workplace can result in employer liability. Employers are liable for the harassment of employees by managers and persons with supervisory authority, regardless of whether the employer knows of the conduct. Employers are also responsible for harassment committed by non-supervisory employees where the employer knew or should have known about the harassing conduct and failed to take prompt, effective, and reasonable remedial action. As a result, an employer could find itself facing a claim for harassment based on conduct outside the workplace.
The Massachusetts Commission Against Discrimination (MCAD) uses the following factors to assess whether conduct outside the workplace constitutes sexual harassment under M.G.L. c. 151B for which an employer is liable:
- whether the event at which the conduct occurred is linked to the workplace in any way, such as at an employer-sponsored function;
- whether the conduct occurred during work hours;
- the severity of the alleged outside-of-work conduct;
- the work relationship of the complainant and alleged harasser, which includes whether the alleged harasser is a supervisor and whether the alleged harasser and complainant come into contact with one another on the job;
- whether the conduct adversely affected the terms and conditions of the complainant’s employment or
- impacted the complainant’s work environment.
To minimize the risk of liability, employers should be proactive in creating a harassment-free workplace and culture, and raise awareness about the responsibilities supervisors have in responding to inappropriate conduct. Employers can do this by conducting anti-harassment training and by distributing the company’s harassment policy. Distributing the company’s harassment policy isn’t just good practice, it’s the law. Massachusetts requires that employers with six or more employees not only have a sexual harassment policy and give it out to new employees when they start work, but also that an individual copy be distributed to each employee annually.
An employer’s commitment to prohibiting harassment extends to employer sponsored gatherings, including holiday parties where alcohol is served. When planning such events, consider reminding employees of their obligations with regard to harassment in advance, and limiting alcohol consumption through strategies such as using trained professional servers.
Contact a member of the Employment Law Group for more information on employer liability for outside of work behavior, responding to complaints of sexual harassment, and for assistance in creating workplace policies.
What are these changes?
- Minimum Wage Goes Up
- Earned Sick Leave Safe Harbor Ends
- Sexual Harassment Law Compliance
- Data Protection Compliance
For all the details read our Employment Law Alert.
But, is this practice legal? Generally, the answer to this question is no. Under state and federal law, employees must be paid at least the minimum wage in cash. Providing equity, no matter how much the equity is worth, does not fulfill this requirement.
An exception to this rule is made, however, if the employee comes within the exemption for executive-business owners provided for in the federal Fair Labor Standards Act (“FLSA”). An individual who comes within this exemption is exempt from the FLSA’s minimum wage and overtime requirements.
To be exempt as an executive-business owner under the FLSA, an individual must (1) be employed in a bona fide executive capacity, (2) own at least a 20% bona fide interest in the business and (3) be actively engaged in the management of the business.
Unless an employee meets each of these requirements, paying in equity alone will run afoul of wage laws, and could result in significant liability for the employer, as well as possible individual liability for the president, treasurer, and individual “officers and agents” of the employer’s corporate entity.
For further help in determining whether your employee comes within the executive-business owner exemption or questions about paying employees with equity, contact a member of our Employment Law Group.
An executive’s employment agreement defines expectations regarding role, responsibilities and performance. It also establishes key contractual obligations for the executive and the employer concerning compensation and benefits, equity grants, the length or term of employment, early termination and its consequences, post-termination restrictions, and dispute resolution. Compensation, termination and other provisions may implicate tax rules and trigger penalties. Later, if there is disharmony in the relationship or disagreement about the parties’ obligations, these provisions may critically affect the rights and obligations of the executive.
Here are 10 important considerations when reviewing an executive employment agreement.
For more information on this topic, please contact Scott J. Connolly.
The Administrator of the U.S. Department of Labor (“DOL”) Wage & Hour Division issued a formal Interpretation to provide “additional guidance” concerning the misclassification of workers as independent contractors under the federal Fair Labor Standards Act (“FLSA”). Businesses continuing to utilize independent contractors need to understand that combating misclassification is a priority for DOL and this latest action may lead to increased misclassification litigation.
To learn more about this important issue read our Employment Law Advisor.
Significant Amendments To The Overtime Regulations Proposed By The DOL Will Result In Many More Workers Becoming Entitled To Overtime
If the U.S. Department of Labor’s (DOL) proposed rule is adopted, any exempt employees who earn less than $50,440 per year will need to be reclassified as non-exempt. These employees will now earn overtime if they work over 40 hours per week.
This proposal would increase the salary level required significantly in order for the employee to remain qualified for the “white collar” exemptions.
To learn more about this proposal and how it may affect you if it goes into effect, please read our full Employment Law Advisor.