Category Archives: New Legislation

Use This Language to Comply with the Notice Requirements in the New Federal “Defend Trade Secrets Act”

Contributed by Jeff Glass, May 17, 2016

As we reported on May 13, 2016, there is now a federal statute, called the Defend Trade Secrets Act (DTSA) that provides a federal cause of action for trade secret misappropriation. The full DTSA is found here.

One important feature of the DTSA is that it, like most state trade secret statutes, allows employers to recover punitive damages and attorney’s fees for the unauthorized use or disclosure of trade secrets. However, unlike the state statutes, the DTSA conditions the availability of these remedies on compliance with certain notice requirements contained in Section 7 of the Act.

The notice must be provided “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” The DTSA also allows notice to be provided by cross referencing a policy document that is provided to the employee.  Although the Act specifically mentions contracts with “an employee,” elsewhere it defines “employee” to include “any individual performing work as a contractor or consultant for an employer.”

The scope of contracts covered by the Act is wide. It would appear to include not only confidentiality agreements entered into at the time of hire, or during employment, but also severance and separation agreements that contain confidentiality provisions.

We strongly suggest that employers add the following language to any contracts that relate to the protection of trade secret information:

Notice of Rights Pursuant to Section 7 of the Defend Trade Secrets Act (DTSA)

Notwithstanding any provisions in this agreement or company policy applicable to the unauthorized use or disclosure of trade secrets, you are hereby notified that, pursuant to Section 7of the DTSA, you cannot be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law.  You also may not be held so liable for such disclosures made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.  In addition, individuals who file a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.

We will keep you updated on further developments under the DTSA.

New Statute Creates Federal Trade Secret Claim

Contributed by Jeff Glass, May 13, 2016

On May 11, 2016, President Obama signed into law the Defend Trade Secrets Act (DTSA).  DTSA provides a new federal cause of action for misappropriation of trade secrets. A “trade secret” is a broad category of intellectual property. Essentially, it includes any business information that is confidential and derives value from not being known to competitors. It can include everything from technology, to business strategies, to proprietary information about customers and prospects. Unlike patents, copyrights or trademarks, there is no registration system for trade secrets nor is there any set expiration date.

Frequently, trade secret claims are asserted where parties accuse competitors of stealing proprietary information. Trade secret claims can also be used where an employee uses his or her access to company information to compete unfairly, but never signed a restrictive covenant.

Legal protection of trade secrets has been available for many years under the Uniform Trade Secrets Act (UTSA), which has been enacted in some form by 47 states. Now, under DTSA, so long as the trade secret dispute meets threshold Commerce Clause requirements – basically, a nexus with interstate commerce – litigants can access the federal courts. DTSA does not pre-empt state statutes or common law doctrines that govern trade secret misappropriation.

The DTSA adopts the framework of the UTSA with some subtle definitional changes which may or may not be significant depending on how courts interpret the Act. This blog will provide updates as the statute is interpreted. Like the UTSA, it provides for recovery of legal fees for willful violations, allows for punitive damages, and provides for sanctions for bad faith lawsuits. DTSA is not retroactive. It applies to violations that occur on or after May 11, 2016.

Although DTSA is similar to UTSA in most respects, there are some noteworthy differences:

  • The Act has a “whistleblower” notice provision that requires employee confidentiality agreements to include language putting employees on notice that they are immune from DTSA liability if they disclose trade secrets in confidence to the government with suspected violations of law or in compliance with subpoenas. If this notice is not provided, an employer cannot avail itself of exemplary damages or attorneys’ fees in DTSA litigation against such persons. Accordingly, employers should update their agreements to provide this notice.
  • The Act provides for ex parte seizures of property in “extraordinary circumstances.”
  • The Act has heightened criminal penalties for trade secret misappropriation.

Notwithstanding these provisions, for most employers, the main impact is the option to file in federal court. This enhances lawyers’ ability to choose the best forum for their clients’ claim. In addition, as the DTSA is interpreted by federal courts, substantive differences in the law applicable to trade secret misappropriation may develop between the state and federal statutes, such that employers would be better served by filing in federal court as opposed to state court.

We will keep you updated in this blog as to the development of the DTSA. Click here to read a follow up on how to comply with notice requirements regarding DTSA.

Chicago Tonight Covers Ban the Box

Ban the Box BlogContributed by SmithAmundsen

In July, we told you about “Ban the Box” coming to Illinois. Effective January 1, 2015, this legislation forbids employers and employment agencies from inquiring about a job applicant’s criminal record or criminal history prior to the applicant being selected for an interview or, if there is no interview, prior to a conditional offer of employment. Yesterday, WTTW Chicago Tonight covered this issue and interviewed our group chair and blog contributor Jeffrey Risch on the issue. Check out the video  here. The story runs around six and a half minutes long, you can see Jeff starting at minute five.

Let the Countdown Begin for the Licensing of Medical Marijuana Registered Users, Dispensaries and Cultivators!

Contributed by Michael Wong

Although the Illinois Medical Marijuana law went into effect on January 1, 2014, marijuana (medical and recreational) is still currently illegal to be possessed or used in Illinois. On July 16, 2014, a significant step was taken towards changing that when the Joint Committee on Administrative Rules (JCAR) approved the administrative rules for the Illinois Medical Marijuana law.

The administrative rules address the licensing of registered users, dispensaries and cultivators, as well as regulations on the operation and management of dispensaries and cultivators. However, the administrative rules still do not provide any guidance to employers on how to comply with the conflicting language of the Illinois Medical Marijuana law when it comes to enforcing drug policies, drug testing and registered users.

With the approval of the administrative rules, applications to become a registered user will start being accepted September 1, 2014, with individuals whose last names begin with A to L being able to submit applications between September 1, 2014 and October 31, 2014, those with last names beginning with M to Z submitting applications between November 1, 2014 and December 31, 2014, and on an open year round basis beginning January 1, 2015. Under the Illinois Medical Marijuana law the Department of Public Health will have 30 days to approve or deny a completed application to become a registered user. This means that individuals will start becoming licensed as registered medical marijuana users by at least October 1, 2014.

That being said, under the law registered users are only allowed to purchase medical marijuana from Illinois licensed dispensaries, which in turn are only allowed to purchase marijuana that is grown in Illinois by an Illinois licensed cultivator. While the administrative regulations set the application process for the 60 dispensary licenses and 21 cultivator licenses, the actual dates that the Departments will start accepting applications have not been set. It is anticipated that the application period for dispensaries and cultivators will be during the fall of 2014, if not sooner. Once the application periods are set, the Departments will post such on their websites.

Even after the dispensaries and cultivators are licensed, registered users will still have to wait for the first crop of marijuana grown by the cultivators in Illinois before they will be able to legally purchase, possess and use medical marijuana in Illinois. Thus, it is anticipated that the legal purchase, possession and use of medical marijuana in Illinois will not occur until early 2015.

It is important that employers take notice of this and proactively take steps to ensure that their policies and procedures are in line with the law. Additionally, employers should make sure to remind employees of their policies on drugs, including prescription drugs and medical marijuana, and specifically the possession of such on company property. This is vitally important to avoid situations where an employee absent-mindedly forgets the policy. While employers may think this is common sense, recently after recreational dispensaries opened in Washington, the City Attorney for Seattle City, Pete Holmes, violated Seattle City’s drug-free workplace policy by bringing marijuana he had legally purchased into city offices.

“Ban the Box” Comes to Illinois: Employers Must Now Revise Hiring Practices and Employment Applications

Contributed by Jeffrey A. Risch and John J. Lynch

The Illinois “Job Opportunities for Qualified Applicants Act” has been approved by the Illinois legislature. It was sent to Governor Quinn on June 27, 2014, and he is expected to sign it into law.

Once signed (or if the Governor doesn’t veto it by August 27, 2014), the Act would go into effect January 1, 2015. Illinois would become the fifth state on a growing list of states (currently Massachusetts, Rhode Island, Minnesota and Hawaii) to enact “ban the box” legislation that applies to public and private employers. Another five states (California, Colorado, Connecticut, Maryland and New Mexico) have laws prohibiting state government employers from asking about conviction records. Additionally, approximately 50 cities and counties throughout the United States have similar ordinances that apply to the municipalities and, in some cases, vendors who do business with those municipalities.

In anticipation of the new Illinois law, and the trend among states to adopt such laws, employers should prepare to review and, if necessary, modify their job applications and hiring policies and procedures to ensure compliance with the Act.

The Act applies to employers with 15 or more employees or employment agencies working on behalf of such employers. It forbids those employers and employment agencies from inquiring about a job applicant’s criminal record or criminal history prior to the applicant being selected for an interview or, if there is no interview, prior to a conditional offer of employment.

Once an applicant is selected for an interview or receives a conditional offer of employment, the employer may make inquiries into the criminal record or history, including conducting a criminal background check. That is, they can do so without violating the Job Opportunities for Qualified Applicants Act. Employers should be aware that such inquiries still may run afoul of Title VII and the Illinois Human Rights Act, depending on the position in question – consideration of conviction records still must be job related and consistent with business necessity.

The Job Opportunities for Qualified Applicants Act does contain three exceptions. First, the Act does not apply to positions from which federal or state laws require the exclusion of applicants with certain criminal convictions.

Second, the Act does not apply to positions that require a standard fidelity bond or equivalent bond and an applicant’s conviction on one or more specified criminal offenses would disqualify the applicant from obtaining such a bond. In that case, the employer may include a question during the application process whether the applicant has ever been convicted of any of those offenses.

The third exception is for applications for positions that are licensed by the Emergency Medical Services Systems Act (210 ILCS 50/1 et seq.).

Employers should note that they are allowed to notify applicants in writing, before or during the application process, of specific offenses that will disqualify the applicant from employment in a particular position due to federal or state law or the employer’s policy. Again, however, compliance with the Job Opportunities for Qualified Applicants Act may not insulate an employer from scrutiny by the EEOC, the Illinois Department of Human Rights (“IDHR”), or other agencies that investigate alleged discrimination – they may find such inquiries not to be job related and consistent with business necessity.

Potentially complicating matters is that the Job Opportunities for Qualified Applicants Act will be enforced by the Illinois Department of Labor (“IDOL”), not the IDHR.

The IDOL is authorized by the Job Opportunities for Qualified Applicants Act to investigate alleged violations and impose the following civil penalties:

For the first violation, the IDOL will issue a written warning requiring compliance within 30 days and a notice that non-compliance and/or further violations may lead to additional penalties.

For a second violation, or failure to remedy the first violation within 30 days, there is a civil penalty of up to $500.

For the third violation, or failure to remedy the first violation within 60 days, there is a civil penalty of up to $1,500.

For any subsequent violations, or failure to remedy the first violation within 90 days, there is a civil penalty of up to $1,500 for every 30 days that pass without compliance.

The Act does not contain a private right of action; that is, an applicant cannot (yet) sue an employer for a violation of the Act. The applicant will have to make a claim to the IDOL, which will investigate. The fines collected will be used only to fund enforcement of the Act, so employers can expect the IDOL to be aggressive in its enforcement in order to increase its resources to enforce the Act.

The Act also empowers the IDOL to adopt rules and regulations to administer the Act. That has not happened yet, of course; but continue to follow the blog for updates on that issue.

New Pregnancy Protections Impacting ALL Illinois Employers!!

Contributed by Jeffrey A. Risch

HB 8, pushed through the Illinois Legislature and ready to be signed into law by Governor Quinn, amends the Illinois Human Rights Act to add to the list of employment discrimination, an employer’s failure to provide a reasonable accommodation to an employee based on conditions related to pregnancy or childbirth. The new amendment will create a legal quagmire for Illinois employers. Employers currently must balance the rights of employees under the current Illinois Human Rights Act (IHRA), the federal Americans with Disabilities Act (ADA), the federal Family Medical Leave Act (FMLA), the federal Pregnancy Discrimination Act (PDA) and the Illinois Workers’ Compensation Act (IWCA). The amendment’s “reasonable accommodations” requirements cover much broader issues and mandate greater responsibilities on employers than current laws covering other protected groups.

HB 8 provides leave rights to all employees well beyond FMLA: The impact of these changes could be devastating to employers. The definition of“reasonable accommodation” includes “time off to recover from childbirth; and leave.”

  • FMLA applies to employers of 50 or more. HB 8 covers all Illinois employers.
  • FMLA provides up to 12 weeks of unpaid leave. HB 8 has no limits on the term of leave. An employer could be required to hold a position open indefinitely.
  • FMLA has employee eligibility requirements of work of 1,250 hours in the past 12 months. No eligibility requirements are in HB 8.
  • FMLA provides that individuals who have used up all or part of their 12 weeks for other purposes cannot use that time for another serious medical condition within the same 12-week period. HB 8 allows unlimited leave for pregnancy, childbirth or conditions related to the pregnancy or childbirth.

HB 8 allows the employee, probationary employee and job applicant to pick the accommodation and employer must accommodate unless the request creates an “undue hardship”.

HB 8’s definition of “pregnancy” is expansive. “Pregnancy” is defined as pregnancy, childbirth or conditions related to pregnancy or childbirth. Could it include infertility???  Could it include certain activities related to ovulation???

No other state has as extensive statute as proposed in HB 8. 

Illinois employers OF ALL SIZES and industries must understand the new amendment!  It will completely reshape how all employers function in Illinois.  

A Win for Trial Lawyers: A Blow to Illinois Employers

Contributed by Anita Johnson

SB 3287 was signed by Governor Quinn yesterday, June 5, 2014. This legislation effectively overturns the prior (2012) Appellate Court decision in Mockbee and Mockbee v. Humphrey Manlift Company, Inc. and R. Harris Electric, Inc., 973 N.E.2d 376, 362 Ill.Dec. 276.  It eliminates the workers’ compensation exclusive remedy/immunity enjoyed by service companies that provide safety consulting services unless those companies are wholly-owned by the employer, insurance broker or the insurer. Erosion of the exclusive remedy provision always creates more litigation and higher costs. The need for removing this protection only for certain safety consulting companies is unknown but again it will be a problem for smaller to mid-sized employers which typically cannot afford or need a full-time safety professional on their staff to address safety issues.  Many employers use consulting firms, at varying degrees, which provide expertise to help keep their operations in compliance with OSHA standards and limit their workers’ compensation exposure to employee injury. SB 3287 will only make it more difficult for employers to maintain safe workplaces.   In addition, these necessary and valuable consulting businesses may be forced out of business by increased insurance costs of their own in light of increased legal exposures.  One more double hit on small business and poor public policy.