USA – NEW JERSEY Trends and Developments Contributed by: Galit Kierkut and Martin C. Fojas, Greenberg Traurig, LLP
Employers Seeking to Protect Confidential Information and Trade Secrets in New Jersey – Legal Overview, Best Practices and Practice Tips Non-compete agreements are often used to protect confidential information from getting into the hands of a competitor. A recent New Jersey case regard - ing non-competes validated the use of both non- competes and non-solicit agreements in New Jersey. At the moment, employers can continue complying with the parameters that have been approved by the courts, including a narrowly drawn agreement tailored to protect relationships and confidential information that is not unduly restrictive to employees. However, employers do need to be prepared to address poten - tial changes in the law in the states where they have employees (whether in offices or remote). An employ - er’s restrictive covenants may become unenforceable overnight, leaving them with little protection over one of their most important assets – their confidential information. If non-compete agreements become unenforceable, employers should still take steps to safeguard their interests with respect to their confidential information. Those protections can be an employer’s best tool to protect confidential information if a key employee departs to a competitor and their non-compete is deemed unenforceable. Even for employers located in states that still enforce non-competes, like New Jer - sey, their workforces likely have many remote employ - ees who live in states that limit those clauses more strictly than the employer’s home state. This may be an issue even with a forum selection clause/choice of law clause selecting New Jersey as the governing law, as certain states may not enforce those clauses as to employees working within their borders. For these reasons, protection of trade secrets is more impor - tant than ever in order to ensure a legal right to take action against an employee who discloses secrets to a competitor. A robust trade secret plan that is consist - ently applied and enforced can be the answer to the
• New Jersey Trade Secrets Act (NJTSA): New Jersey enacted the NJTSA in 2012 (modelled after the Uniform Trade Secrets Act, a version of which has now been adopted in every other state besides New York), to provide rights and civil remedies concerning the misappropriation of trade secrets, without displacing or replacing any other pre-exist - ing rights or remedies for misappropriation of trade secrets. • Defend Trade Secrets Act of 2016 (DTSA): The fed - eral DTSA creates a federal civil action for misap - propriation of trade secrets, which allows plaintiffs to bring a trade secret claim in federal court and to seek injunctive relief, damages, restitution, and exemplary (punitive) damages, as well as attor - neys’ fees for an actual or threatened misappro - priation of trade secrets. Although attorneys’ fees may be awarded to either a successful plaintiff or a successful defendant, such awards are left to the discretion of the trial judge, not decided by the jury. Fees may be awarded in favour of the plaintiff where the “trade secret was willfully and maliciously misappropriated”, and in favour of the defendant where the “claim of the misappropriation is made in bad faith”. Successful defendants are not typically awarded fees in trade secret misappropria - tion cases, absent evidence that the plaintiff knew, or was reckless in not knowing, that the misappropriation claim lacked merit. Trade secret claims under the DTSA, NJTSA, and New Jersey common law claims of misappropriation are frequently brought together. New Jersey courts have held that analysis under the DTSA “folds into” the analysis under the NJTSA with respect to deter - mining whether the plaintiff has sufficiently identified a trade secret and has otherwise alleged a claim of misappropriation. New Jersey courts permit common law claims for misappropriation to proceed alongside the statutory claims because common law claims are considered to be broader than the DTSA and NJTSA – in that they protect confidential information that may not qualify as trade secrets under the DTSA or NJTSA.
changing landscape of non-competes. Trade secret claims in New Jersey
Trade secrets in New Jersey are protected by statute at the state and federal level, as well as under New Jersey common law:
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