5. Update your confidentiality agreements to obtain the full benefit of the new law. It is always advisable to revisit confidentiality agreements to ensure coverage of recent company innovations. The passage of the Defend Trade Secrets Act (DTSA) in 2016 also gave employers a new reason to revise these agreements. The DTSA addressed a long-felt need for uniformity in trade-secret law by establishing a national trade-secret protection standard. Recognized by many as the largest expansion in federal law in intellectual property since the Lanham Act in 1946, the DTSA creates a new federal civil cause of action for trade-secret misappropriation. In addition to remedies for compensatory damages, pursuant to the DTSA employers may seek exemplary damages (double damages) and attorneys’ fees. However, such damages are only available when the confidentiality agreement with the employee provides an “immunity notice” in accordance with the statute. This notice must appear in confidentiality agreements executed on or after May 12, 2016.
6. Analyze whether restrictive covenants are right for you. Many tech employers have never considered requiring employees to sign agreements not to compete or not to solicit clients or employees, while others have never considered going without. Employers should assess whether (a) they should have a restrictive covenant agreement, (b) their current restrictive covenant agreement is enforceable, (c) their practices are within industry norms, and (d) all or some of their employees should be bound by a restrictive covenant. The ability to restrict employees’ future competitive activities depends on applicable state law and jurisprudence.
7. Review your pre-hire forms and processes. Tech companies often grow rapidly, which necessitates the constant updating of on-boarding forms and processes. Laws and jurisprudence concerning background checks and confidentiality of personnel data are also continuously changing. Review these forms and processes and ensure that they comply with local and federal law.
8. Ensure that your employees are properly classified. As companies grow, the shortcuts of hiring independent contractors or classifying everyone as exempt become problematic. Federal and state laws provide more limited bases upon which an independent contractor may be utilized than most employers realize. And while an employer may have intended that a role be exempt (and not eligible for overtime pay), in practice the role may lack the characteristics that confer exempt status. Conducting an audit of employees and contractors can be a time-consuming process, but it is worth the investment to avoid the significant expense associated with misclassification, particularly given the long statutes of limitations and the availability of punitive damages in some states.
9. Assess your employee performance assessments. Although tech companies tend to be more informal, a formal review process is still essential to employee development and protecting employers from potential claims. Train your managers to write specific, constructive and honest reviews of employees, which help to both ensure employees receive feedback and document poor performance, and to deliver these reviews in a timely, thoughtful and clear manner.
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