I was recently invited to contribute a chapter on employment law to the 2017 Israel Desk International Legal Guide. As more and more Israeli companies bring their operations to the U.S., they learn firsthand the intricacies of our employment laws. The chapter outlines six trends that I suggested that they pay attention to. They include wage and hour laws, equal pay, accommodating disabled workers, whistleblower claims, local regulations, and trade secrets.

Copyright: slidezero / 123RF Stock Photo

On the topic of trade secrets, I had the opportunity to give a presentation in Tel Aviv last month on Protecting Your Trade Secrets in Silicon Valley and Beyond to members of IATI (Israel Advanced Technology Industries – an industry group for high-tech and life science companies). You can read my chapter on legal trends and see a copy of my presentation on trade secrets.

Fox Rothschild LLP’s Israel Practice Group is adept at helping companies based in Israel with their U.S. legal needs.

It’s not enough that a trade secret isn’t generally known to those who can gain value from it. To qualify for protection in California and the other jurisdictions that use the Uniform Trade Secrets Act definition (and under the Federal Defend Trade Secrets Act), a trade secret must be the subject of reasonable measures to maintain its secrecy.

If you find yourself litigating whether your company’s information qualifies for protection, you should expect a lot of time and effort to be focused on the steps your company took to protect that information.

Here are 22 steps companies can take. Obviously, they won’t all make sense in all situations.

1.      Have employees sign confidentiality agreements that meet current legal requirements.

2.      Have third-parties sign nondisclosure agreements.

3.      Have a written policy explaining how to handle trade secrets and prohibiting misappropriation.

Copyright: sam74100 / 123RF Stock Photo
Copyright: sam74100 / 123RF Stock Photo

4.      Train new employees to recognize what information is protected and how to handle it.

5.      Periodically retrain existing employees.

6.      Limit who has access to confidential information.

7.      Mark documents and files to identify the level of protection they’re to receive.

8.      Implement an information tracking system.

9.      Dispose of information properly.

10.  Regulate information that must leave the company.

11.  Encourage employees to report suspected misappropriation.

12.  Lock areas that contain confidential information.

13.  Place warning signs in areas that contain confidential information.

14.  Install security cameras.

15.  Monitor visitors to your company.

16.  Provide departing employees with copies of signed agreements and review key provisions.

17.  Confirm that departing employees have returned all company information and equipment.

18.  Terminate departing employees’ access to company systems and facilities.

19.  Ask departing employees about future employment plans.

20.  If the departing employee is going to a competitor or is evasive regarding his future plans, consider whether further action is necessary, such as requiring him to leave sooner, reviewing what systems he has accessed, sending a letter to the employee, and sending a letter to the prospective employer.

21.  Immediately investigate suspected misappropriation.

22.  Conduct a trade secret audit to determine if information is being properly protected.

Again, what is reasonable in one situation won’t make sense in others. The steps Google takes to protect its search algorithm will be very different from the steps that place by your office uses to protect its tomato soup recipe. I think the secret ingredient is basil, but that’s beside the point. The point here is that companies need to take those steps that are reasonable to safeguard their information. Because if they don’t, the information won’t qualify for protection.

My December routine is pretty predictable…sitting by the fire with my favorite holiday season beverage and my laptop fully charged to update employment handbooks and forms for the new year.  As an employment law policy and counseling specialist, I’m working on handbook number seven so far this month and thought I would share some of my specific updates with you.

glasses.

  1.  Paid Sick Leave
    Though Los Angeles City Paid Sick Leave went into effect July 1, 2016, there are many employers without compliant policies.  The LA Ordinance doubles CA state-mandated sick pay but does not apply to exempt employees, like the state law does.  Additionally, the LA Ordinance regulations say that if an employer has a more generous PTO policy in existence, the City may deem the employer compliant.  The issue that I’m seeing is that many employer PTO policies exclude part-timers so there is a gap in compliance with respect to those part-timers who may be entitled to accrue more paid sick leave under the LA Ordinance than under the state law.
  2. Harassment
    We’ve said it before, but the “new” DFEH regulations went into effect April 1, 2016.  Most policies generally need a few small tweaks to be compliant, as detailed here.
  3. Fair Pay
    Though it only went into effect a year ago, there are two notable amendments in SB 1063 to the California Fair Pay Act that should be reflected in your policies.  The first amendment mandates that employees of different races or ethnicities be paid the same for performing “substantially similar” work. The other amendment forbids employers from relying on an employee’s salary history alone as justification for a pay gap between employees.
  4. Defend Trade Secrets Act
    New requirements for Confidentiality and Non-disclosure agreements and policies took effect earlier this year as we detailed in this Client Alert.
  5. Domestic Violence Notice
    Expanded protections for victims of domestic violence, sexual assault, and/or stalking take effect in 2017. The amended law requires employers to inform each employee of his or her rights established under the law by providing specific information in writing to new employees upon hire and to other employees upon request. Employers will not be required to distribute this information until the labor commissioner publishes the form employers will be able to use to comply with the law, which should happen no later than July 1, 2017.
  6. Wage Theft Prevention
    If you reclassified any employees from exempt to non-exempt given the uncertainty of the DOL regulations, be sure to issue newly non-exempt employees the required Wage Theft Prevention form upon reclassification and ensure compliance with time tracking, meal and break periods.

If you haven’t gotten to these updates yet, I’m sure I will be issuing 2017 edition handbooks straight through January, though I may go back to drinking my vanilla lattes by then.

As I have mentioned before, every California employer, large or small, needs three things: (1) an Employee Handbook that addresses California specific issues; (2) a comprehensive Confidentiality Agreement to protect the company’s proprietary information to the greatest extent possible; and (3) an Arbitration Agreement.

From time to time, I run across employers who never want to finish their handbook.  Instead it is in a constant state of revision and refinement.  This can be problematic.  It is not necessary to rush to update a handbook or agreement every time some new law is announced.  I generally recommend thoughtful updates of all three documents, on a regular, periodic basis (at least once a year, maybe twice).  It is important that these documents are drafted and reviewed as a set, otherwise they could unintentionally contradict each other.

Another objection I often hear is “why should we bother updating the handbook – no one reads it anyway.”  My answer is what matters is that employees acknowledge the handbook, so you can use it as a basis for discipline, and as a defense to litigation.  With so many plaintiffs’ counsel requesting personnel files to evaluate possible claims, the absence of policies is never helpful.

Believe it or not, we are already approaching the half-way mark for 2016, so June 1st or July 1st is a good time for an update.  The following are a few key items to consider:

First, there is an important new federal law involving confidentiality agreements.  As my partner, James Singer, explained in this helpful Alert, in order to get protections of the Defend Trade Secrets Act, your employee handbook and/or confidentiality agreement should be updated to include certain language providing immunity for whistleblowers.  Failing to add this language can preclude a new avenue of recovery under the DTSA, so it certainly makes sense to include it.

Second, as my partner Jeff Polsky explained, some updates to your harassment policy may be required to comply with California’s new regulations.

Third, check your local ordinances, keeping in mind that the LA Hotel Ordinance goes into effect for additional properties on July 1st (and requires some time off policy updates in addition to wage increases), that Santa Monica’s minimum wage ordinance has updated paid sick leave requirements, and that Los Angeles employers may have new requirements for paid sick leave if a proposal recently approved by the City Council is adopted.

If you don’t want to update all of your policies mid-year, another option is a mid-year notice to employees, and then a full scale revision at year-end including all of the updates.  Either way, mid-year is a good time for a policy tune-up.

Copyright: Krisdog / 123RF Stock Photo
Copyright: Krisdog / 123RF Stock Photo

A dispute has been raging for years between Mattel and MGA Entertainment over who owns the rights to the highly successful Bratz line of dolls. Knowing that few of our faithful readers are preteen girls, I’ll provide some background. For decades, when it’s come to dolls, Barbie was the queen. But over 10 years ago, Barbie got some serious competition from some less demure, less conservative, multi-ethnic upstarts – the Bratz.

A fight broke out over who owned the rights to the Bratz line. At the center of the fight was Carter Bryant. Bryant worked on Barbie at Mattel, then left for MGA in 1998. Mattel said he and MGA misappropriated trade secrets. MGA countered that Mattel misappropriated its intellectual property.

The case went to trial in 2008 and Mattel won a resounding victory — $100 million in damages and equitable relief that effectively gave them all rights to the line going forward.  MGA appealed and the Ninth Circuit reversed.  The opinion (pdf), written by the always entertaining Chief Judge Alex Kozinski, concluded that the judgment went too far and failed to recognize the value MGA added in developing the brand.  So the court ordered a new trial.

This new trial ended this week with a very different outcome.  Instead of Mattel being awarded $100 million, the second jury awarded MGA $88 million.  I’m sure that there were any number of factors that distinguish the second trial from the first.  But still, that’s quite a swing.

Another thing noteworthy about this dispute is the level of nastiness. As reported in the New Yorker, a memo introduced at trial accused MGA of attempting a “Barbie genocide” and characterized Barbie vs. Bratz as equivalent to “good vs. evil.”  After the trial, Mattel complained that MGA prejudiced jurors against it. Among other things, Mattel said MGA improperly accused Mattel of causing MGA’s founder to suffer a stroke and of hiring people to follow and intimidate his teenage son. Mattel further complained that MGA and its attorneys accused Mattel of having magnets in its toys that killed children.

So what can we conclude from this? That prolonged litigation causes some people to behave poorly? That the outcome of jury trials is inherently uncertain? I’ll admit that neither of those statements is particularly newsworthy.  But they bear repeating.  There’s a reason why alternative dispute resolution is so often a more attractive option.  And after seven years of litigation and two trials, no one thinks that this particular dispute is over.