Congress-Passed Employer Trade Secrets Bill Includes Employee Protections

April 29, 2016

This week, the House passed legislation, expected to be signed by President Obama soon, to help businesses safeguard their trade secrets while protecting workers' rights to seek new employment.  The Defend Trade Secrets Act (S. 1890), which is supported by a broad industry coalition, will enable businesses to sue for damages or seek an injunction in federal court related to the misuse or misappropriation of their trade secrets.  However, the measure also includes language providing that an injunction is improper and not issuable if it:
  • Prevents a person from entering into an employment relationship, or if conditions placed on employment are not supported by evidence of threatened misappropriation of trade secrets; or
  • Otherwise conflicts with an applicable state law prohibiting restraints on the practice of a lawful profession, trade, or business.
Congress added these employee protections to address concerns that employers might abuse federal court injunctions to get around state and local laws limiting the scope of restrictive covenants in employment contracts.  Importantly, the bill does not preempt state and local laws.