Confidentiality agreements are critical to protecting against an employee’s disclosure of trade secrets and confidential information and can be dispositive with respect to an array of contract and tort claims involving the improper disclosure of competitive intelligence. For that reason, it is imperative to ensure confidentiality provisions found in employment agreements, separation agreements, and other agreements arising in the employment context comply with applicable law. Conversely, for litigation counsel, it is imperative to be strategic about choice of law arguments, as restrictive covenant laws vary greatly from state to state, choice of law could be dispositive, and restrictive covenant laws are frequently changing.
To illustrate, one recent change in the law to be aware of arises from the Illinois Workplace Transparency Act (WTA), which took effect January 1, 2020 and applies prospectively. The WTA prohibits agreements in the employment context that (i) contain a “unilateral term or condition of employment or continued employment” and (ii) have “the purpose or effect of preventing an employee or prospective employee from making truthful statements or disclosures about alleged unlawful employment practices.”
To protect against an enforceability challenge where Illinois law applies, ensure that provisions governing confidential information and trade secrets are not part of a broader confidentiality requirement that would violate the WTA. Specifically, make clear that the confidentiality obligation does not require the employee to abstain from truthful statements regarding unlawful employment practices. A broad provision that includes prohibited restrictions may be the subject of “blue penciling,” such that reasonable restrictions that do not violate the WTA are still enforced, but it could also be that the court is unwilling to enforce the confidentiality provision entirely given the strong public policy considerations that lead to new laws such as the WTA.
Ultimately, counsel should be aware of new laws such as the WTA and consider their impact on choice of law and overall litigation strategy.
Maria Kreiter is a shareholder with Godfrey & Kahn in Milwaukee, Wisconsin.
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