Whistleblower Immunity: Supplementing in Accordance with the Defend Trade Secrets Act Contracts that Require Employees or Contractors to Keep Information Confidential

Because (@FlemingMF) posted on my blog way back in the early days, I’ve been in the habit of referring to him as “the ur-commenter.” But since I’m perhaps one of 227 people in this country familiar with use of ur– as a prefix, I’ve decided that “Commenter Zero” is a better moniker. Wear it with pride, Michael.

In any event, for old time’s sake Michael shows his face on the blog every once in a while. On his most recent visit, he told me that the recent federal trade-secrets legislation, the Defend Trade Secrets Act (DTSA), not only grants whistleblower immunity in certain circumstances, it also says as follows:

An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee [or contractor or consultant] that governs the use of a trade secret or other confidential information.

For a useful guide to this, see this alert by Matthew J. Frankel of Nixon Peabody. In it, Matthew explains why you might want to ignore this requirement.

To paraphrase Matthew, if you fail to comply with this requirement, you wouldn’t be entitled to important potential remedies in a trade secret misappropriation suit. But nothing in the Defend Trade Secrets Act suggests that those remedies wouldn’t be available under state law, although developments in the law might preclude state law remedies.

That’s the downside of not complying with the DTSA requirement. Here’s what Matthew says regarding the downside of including a notice of whistleblower immunity in your contracts:

Even so, employers should think critically about providing a detailed notice of whistleblower rights if not providing such notice is unlikely to have any material negative consequences. Such a notice might encourage an employee planning or engaging in misappropriation to manufacture a bogus “whistleblowing” issue in order to shield or obfuscate his or her misconduct.

So you have to decide which downside you’re more worried about.

Here’s a suggestion of my own: if I include confidentiality provisions in a contract as a matter of routine and not because I have valuable confidential information that I’m concerned about, I wouldn’t bother about complying with the DTSA requirement.

With that preamble over, on to the main event! How should you word the notice in question?

Examples I found on EDGAR all featured varying amounts of padding. I suggest that you do the minimum: quote the immunity provisions and say that you’re quoting them as required by the DTSA. I don’t see any point in being coy and using a not-particularly-informative heading such as “Defend Trade Secrets Act Notice.” And in quoting the DTSA, it’s safe to eliminate the headings and the tabulation. So here’s my version:

Whistleblower Immunity. In accordance with 18 U.S.C. § 1833(b)(1), Acme hereby notifies the Employee that federal law states as follows:

An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that (A) is made (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.

An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual (A) files any document containing the trade secret under seal; and (B) does not disclose the trade secret, except pursuant to court order.

About the author

Ken Adams is the leading authority on how to say clearly whatever you want to say in a contract. He’s author of A Manual of Style for Contract Drafting, and he offers online and in-person training around the world. He’s also chief content officer of LegalSifter, Inc., a company that combines artificial intelligence and expertise to assist with review of contracts.