Trade Secrets & Employee Mobility

Exchange Act Rule 21F-17, adopted in 2011 under the auspices of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, prohibits any person from taking any action to impede an individual from communicating directly with the SEC, including by “enforcing, or threatening to enforce, a confidentiality agreement . . . .”  The SEC has prioritized enforcing this rule expansively, by requiring employers to provide SEC-specific carveouts to policies and agreements governing confidentiality.  According to an Order issued last week against The Brink’s Company ( “Brink’s” or “Brinks”), the SEC seems to suggest that employers must provide a specific carveout in restrictive covenant agreements permitting employees and former employees to report information to the SEC in addition to the statutory disclosure provided for in the federal Defend Trade Secrets Act (DTSA).

It is a common practice for employers to obtain a written agreement from employees to refrain from disclosing company trade secrets and other confidential and proprietary information. Such agreements are structured to be effective after an employee departs, as well as while he or she is actively employed. Confidentiality and non-disclosure agreements can be an important tool in an employer’s efforts to protect trade secret, business-sensitive, and other confidential information, but if they are not thoughtfully and carefully drafted, they could engender unwelcome ...