The Defend Trade Secrets Act – One Year Later

Posted in Trade Secrets

The Defend Trade Secrets Act (DTSA) celebrates its one-year anniversary on May 11, 2017. The DTSA is the most significant expansion of intellectual property law since the Lanham Act was passed in the 1940s. Approximately 70 cases were filed in California federal courts asserting DTSA claims in the past year; but, after one year of litigation, it is still too early to tell how much impact the DTSA has made on trade secret law in California. Nevertheless, even a one year anniversary is worth marking.

The Differences Between the California Uniform Trade Secret Act and the DTSA

The DTSA automatically bestows federal jurisdiction on trade secret claims, allowing DTSA claims to be brought exclusively in federal court. Although trade secret theft has been a federal crime since 1996, prior to the passage of the DTSA, civil claims for trade secret misappropriation were typically governed by state law. The California Uniform Trade Secret Law (CUTSA) cannot be brought in federal court, absent a showing of diversity or concurrent jurisdiction under another claim arising from the same transaction or occurrence as the CUTSA claim. CUTSA also broadly preempts common law claims based on the same nucleus of facts as the trade secrets claim, however the claim is characterized, such as breach of fiduciary duty, breach of loyalty, conversion, fraud, interference with contract, or unfair competition. In contrast, the DTSA does not preempt any provisions of law, including state trade secret laws, such that a plaintiff filing suit in California can bring both a DTSA and CUTSA claim in federal court. The plaintiff must weigh, in bringing both, whether it wants to allege a CUTSA violation and thereby bar the assertion of related state law tort and restitution claims. Notably, a DTSA claim cannot be brought in state court. Finally, because there are many parallels between the CUTSA and DTSA, federal courts can be expected to consider CUTSA precedent and, longer-term, California courts will likewise consider DTSA decisions.

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New York City to Prohibit Employer Inquiries into Salary History

Posted in Discrimination, Wage & Hour

On May 4, 2017, New York City amended its Human Rights Law (NYCHRL) to join the growing number of municipalities that prohibit employers from inquiring about applicants’ wage history. Ostensibly designed to “help break the cycle of gender pay inequity[,]” this new restriction may open employers to yet another theory the plaintiffs’ bar can seek to exploit.

Beginning Oct. 31, 2017, it will be “an unlawful discriminatory practice” under the NYCHRL for an employer (i) to inquire about the salary history of an applicant, or (ii) to rely on the salary history of an applicant in determining compensation during the hiring process. The term “inquire” is broadly defined, and includes not only asking an applicant what he or she has been paid by prior or current employers, but also searching public records to obtain that information. The law does not prohibit (i) inquiries into objective productivity metrics “such as revenue, sales, or other production reports,” (ii) discussing with an applicant “their expectations with respect to salary, benefits and other compensation,” or (iii) verifying and considering an applicant’s salary history where he or she “voluntarily and without prompting discloses” it.

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House of Representatives Passes Overtime Bill to Give Workers Time Off Instead of Time-And-A-Half Pay

Posted in FLSA

On May 2, 2017, the United States House of Representatives (the House) passed the Working Families Flexibility Act (the Act), which would give workers the option of receiving paid time off (PTO) instead of time-and-a-half pay currently mandated by the Fair Labor Standards Act (the FLSA). The Act passed 227-197, largely along party lines, with no Democrats in favor of it and six Republicans opposed.  The Act will now go to the Senate, where it is expected that the Act will face opposition from Senate Democrats. President Donald Trump has indicated that he would sign the Act into law if presented to him in its current form.

Under the FLSA, covered, non-exempt employees must receive overtime pay for hours worked over 40 in a workweek, at a rate not less than time and one-half their regular rate of pay. An employee’s regular rate of pay is determined on a piece-rate, salary, commission, or other basis, but the overtime pay rate must be calculated using the average hourly rate derived from the employee’s earnings. Employers determine the average hourly rate by dividing the total pay received by the employee in any work week by the 40 hours. The employer then pays the employee overtime for each hour over 40 at time-and-a-half of the average rate.

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OSHA Rescinds Fairfax Memo – OSHA No Longer Required to Permit Union Reps to Represent Non-Union Employees in Walkaround Inspections

Posted in OSHA

On April 25, 2017, the Occupational Safety and Health Administration (OSHA) rescinded a Feb. 21, 2013 letter from former Deputy Assistant Secretary Richard E. Fairfax to Mr. Steve Sallman (Fairfax Memo) that permitted workers at a worksite without a collective bargaining agreement to designate a person affiliated with a union or community organization to act on their behalf as a representative during an OSHA walkaround inspection.

Employers have viewed the Fairfax Memo as a way for unions to get access to employees that they hope to unionize. With the rescission of this memo, employers are no longer required to permit union officials to represent workers at a worksite without a collective bargaining agreement during an OSHA walkaround inspection.

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Ninth Circuit Widens Circuit Split on Whether Dodd-Frank Protects Internal Whistleblowing

Posted in Sarbanes-Oxley, SEC, Whistleblower

Introduction

On March 8, 2017, in Somers v. Digital Realty Trust Inc., No.15-cv-17352 (9th Cir., March 8, 2017), the Ninth Circuit Court of Appeals affirmed the district court’s denial of the defendant’s motion to dismiss a whistleblower claim brought under the Dodd-Frank Act’s (“DFA”)’s anti-retaliation provision.

In a 2-1 decision, the majority endorsed the approach of the Second Circuit, and not that of the Fifth Circuit, in holding that Congress did not intend to limit DFA whistleblower protections to only those who disclose information to the Securities and Exchange Commission (“SEC”). Rather, the court held that the DFA anti-retaliation provision also protects those who are fired after making internal disclosures of allegedly unlawful activity under the Sarbanes-Oxley Act (“SOX”) and other securities laws, rules, and regulations.

The majority also agreed with the Second Circuit that, to the extent there was any ambiguity in the statute, an SEC regulation, 17 C.F.R. § 240.21F-2 (Rule 21F-2) interpreting the DFA to protect those who made only internal disclosures resolved any such ambiguity and was entitled to Chevron deference.

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The Senate Narrows Employers’ Obligation to Accurately Record Work-Related Injury and Illness Records

Posted in OSHA

On March 22, 2017, the Senate passed H.J. Resolution 83, a Congressional Review Act (CRA) resolution (Resolution) that cuts the Occupational Safety and Health Administration’s (OSHA) ability to cite an employer for failing to accurately record work-related injuries and illnesses from five years to six months.1 The resolution blocks and eliminates OSHA’s “Volks” final rule, also known as “Clarification of an Employer’s Continuing Obligation to Make and Maintain an Accurate Record of Each Recordable Injury and Illness” (Final Rule). The Final Rule, which went into effect Jan. 19, 2017, gave OSHA the authority to fine and cite employers that failed to accurately track and record work-related injuries and illnesses for up to five years after they occur.

If President Trump signs the resolution (which he is expected to do), OSHA will only be permitted to cite employers for failing to keep accurate records of workplace incidents up to six months after the recordkeeping violation occurred. OSHA will also be barred from passing a substantially similar measure; Congress must pass a law instead, which is usually a more difficult process.

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Sixth Circuit Joins Six Other Circuits in Ruling Exhaustion of Plan’s Administrative Procedures Not Required When Asserting Statutory Violations

Posted in ERISA

On Tuesday, March 14, 2017, in Hitchcock v. Cumberland University, No. 3:15-cv-01215, 2017 WL 971790 (6th Cir. Mar. 14, 2017), the Sixth Circuit Court of Appeals joined six other federal circuits in ruling that Employee Retirement Income Security Act (“ERISA”) plan beneficiaries are not required to exhaust administrative remedies prior to filing suit when asserting statutory violations as opposed to claims for benefits.

Plaintiffs, former employees of Cumberland University (the “University”), were participants in a defined contribution pension plan (the “Plan”) sponsored by the University for its employees. In 2009, the University adopted a five percent matching contribution, whereby the University would match an employee’s contributions to the Plan up to five percent of the employee’s salary.  On October 9, 2014, the University amended the Plan retroactively to 2013 to replace the match with a discretionary match, whereby the University would determine the amount of the employer’s matching contribution on a yearly basis.  The University also announced that the employer matching contribution for the 2013-14 year, and for the 2014-15 year, would be zero percent.

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11th Circuit Upholds Longstanding Precedent: Sexual Orientation Claims Are Not Cognizable Under Title VII

Posted in Discrimination

On March 10, 2017, in Evans v. Ga. Reg’l Hosp., No. 15-15234, 2017 U.S. App. LEXIS 4301 (11th Cir. Mar. 10, 2017), the 11th Circuit Court of Appeals in a majority split affirmed a district court’s dismissal of a former employee’s suit against her employer, which alleged discrimination in violation of Title VII on the basis of her sexual orientation as a lesbian and for failing to carry herself in a “traditionally” womanly manner. In rendering its decision, the 11th Circuit relied on binding precedent in Blum v. Gulf Oil Corp., 597 F.2d 936, 938 (5th Cir. 1979), which expressly holds that “[d]ischarge for homosexuality is not prohibited by the Title VII.” Id.

The Court in Evans explicitly stated that despite the fact that claims for gender non-conformity and same sex discrimination may be brought under Title VII, it does not allow the Court to abandon the longstanding holding in BlumId. at *15.

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Employer Guidance – National Immigrant Protests

Posted in Immigration, NLRB

In connection with “National Day without Immigrants” held on Thursday, Feb. 16 and Friday, Feb. 17, immigrant employees as well as supporters and sympathizers may have requested time off or, in some instances, called in sick from work to attend protest-related events and activities. Supporters called on the public to refrain from working, opening businesses, and spending money in an effort to show the impact immigrants have on our country each day.

Although having employees absent from work may pose challenges for business operations, it is important to recognize that the decision to participate may be protected in some instances. Congress enacted the National Labor Relations Act (NLRA) “to protect the rights of employees and employers, to encourage collective bargaining, and to curtail private sector labor and management practices, which can harm the general welfare of workers, businesses, and the U.S. economy.” More specifically, the NLRA provides that employees are protected under the “mutual aid or protection clause” of Section 7 when they seek to “improve their lot as employees through channels outside the immediate employee-employer relationship.”

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Employer’s Honest Belief Sufficient to Defeat FMLA Retaliation Claim

Posted in FMLA, Litigation

In a welcome decision to employers, the Third Circuit decided last week, for the first time, that an employer’s mere “honest belief” that an employee misused FMLA leave is sufficient to defeat a retaliation claim. As an employee claiming retaliation for using protected FMLA leave must prove that the very exercise of that right was a determinative factor in the employer’s decision to take adverse action against her, in other words that there was retaliatory intent, it is good news for employers that they can now successfully defend against claims simply by showing they believed in good faith that the employee misused what was otherwise protected leave. While the Seventh, Eighth, and Tenth Circuits have reached similar decisions, this was previously an open issue in the Third Circuit.

Also of note, the Third Circuit rejected plaintiff’s claim that his employer failed to accommodate his disability under the ADA. While the FMLA (unlike the ADA and most state law analogues) does not require employers to provide reasonable accommodation, a request for leave under the FMLA may under certain circumstances now qualify as a request for a reasonable accommodation under the ADA.

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