By Michele L. Jakubs*
On May 18, 2016, the United States Department of Labor (“DOL”) announced it will publish its final rule increasing the salary thresholds for exemptions under the Fair Labor Standards Act (“FLSA”). The final rule sets the new salary threshold for “white collar” exemptions at $47,476 annually. For the highly-compensated employee exemption, the new salary threshold is set at $134,004 annually. The final rule (including the new salary thresholds) goes into effect on December 1, 2016. The changes will have a major impact on employers, as an estimated 4.2 million formerly-exempt employees will become eligible for overtime.
The FLSA generally requires employers to pay employees for any time worked in excess of forty hours per work week at a rate of one-and-a-half times the employee’s regular rate. The FLSA exempts “white collar” and highly-compensated employees from the overtime requirement, provided the employees meet specific criteria.
Employees qualify for an exemption by meeting three criteria: (1) the employee receives a fixed salary; (2) the salary meets the minimum threshold requirement (currently $455 per week, or $23,660 per year); and, (3) the employee’s responsibilities primarily involve executive, administrative, or professional duties. Highly-compensated employees who regularly perform one or more exempt duties also are exempt.
Under the final rule, the salary threshold for an exemption is set at the 40th percentile of earnings of full-time salaried workers in the lowest-wage Census Region. When the rule goes into effect on December 1, 2016, the salary threshold will increase to $913 per week, or $47,476 per year, more than twice the current threshold. Employers may, for the first time, use non-discretionary bonuses and incentive payments to satisfy up 10% of the new salary threshold. For the highly-compensated employee exemption, the new salary threshold is set at the 90th percentile of full-time salaried workers nationally, and will increase from $100,000 to $134,004 on December 1, 2016. These salary thresholds will be updated automatically every three years to maintain salary levels at the referenced percentiles.
The final rule does not make any changes to the existing job duty requirements for the “white collar” and highly-compensated employee exemptions.
In light of the dramatic increases in the salary thresholds, employers should consult with counsel to develop a course of action to ensure compliance with both the salary and duties tests. This change in the law presents an opportunity for employers to review whether employees classified as exempt truly meet the duties test, and the new salary threshold, under the FLSA and make any necessary corrections. The implications of misclassifying employees are widespread and costly and may result in litigation or an investigation by the DOL. With just over six months to prepare and implement a plan, employers should begin the process as soon as possible.
*Michele L. Jakubs, an OSBA Certified Specialist in Labor and Employment Law, practices in all areas of labor and employment law and is particularly adept at handling wage and hour issues. If you have questions about how the Department of Labor’s final rule may impact your company, please contact Michele (mlj@zrlaw.com) at 216.696.4441.
Wednesday, May 18, 2016
Thursday, May 12, 2016
What’s a Trade Secret? Soon, Federal Courts Will Decide That Question
By: Brad E. Bennett* and Ami J. Patel**
Yesterday, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”). As the law’s name suggests, the DTSA will have a major impact upon any business that seeks to protect its confidential information from inappropriate use, disclosure, and theft.
DTSA now provides access into the federal court system for anyone desiring to bring suit on most trade secrets violations. Since trade secret violation claims are commonly paired with claims for breach of non-competition and non-solicitation agreements, those latter claims now also will land in federal court far more often. DTSA will also require all employers to rewrite their non-disclosure agreements and employee handbooks, or else they will forfeit some of the DTSA’s key protections, such as the ability to recover exemplary damages and attorneys’ fees in certain situations.
Among the DTSA’s more interesting provisions:
Whistleblower / Anti-Retaliation Immunity: DTSA provides immunity to individuals who disclose trade secrets to government officials in the course of reporting suspected violations of the law. Furthermore, individuals who file a lawsuit against their employer for retaliation (which could include discrimination/harassment) may disclose trade secrets to their attorney and the court. This right might be construed broadly enough to encompass more than mere whistleblowing, but also to include ordinary retaliation claims under the discrimination laws to the extent that they are premised upon “opposition.”
Immunity Disclosure Requirements: Employers must disclose DTSA’s immunity provision to employees in any contract or agreement that governs the use of trade secrets or other confidential information (e.g., non-solicitation, confidentiality agreements). DTSA prevents employers who fail to comply with this notice requirement from obtaining exemplary damages or attorneys’ fees. This compliance item will require employers to revise any handbook provisions on confidentiality, as well as all employee non-disclosure agreements.
Inevitable Disclosure: DTSA specifically prohibits an employer from obtaining an injunction to prevent someone from entering into an employment relationship on the basis of the information that person knows. This provision effectively nullifies the “inevitable disclosure” doctrine that some courts had developed, under which an employer could seek to enjoin a former employee from working in a job that would inevitably result in the use of trade secrets, even if no evidence of actual disclosure existed.
Definitions: DTSA specifically excludes “reverse engineering” and “independent derivation” from the definition of what it means to acquire a trade secret by improper means.
Federal Seizure Remedy: In “extraordinary circumstances,” a federal court may authorize the ex-parte seizure (without notice to the other party) of property to prevent dissemination of trade secrets. This remedy is available in extremely limited circumstances, and the employer must meet a high burden to obtain this remedy. For example, the employer must demonstrate, via a verified complaint, that a temporary restraining order would be insufficient and that the wrongful holder of the trade secrets may destroy the trade secrets if given advance notice. DTSA also creates a cause of action for damages resulting from wrongful seizures. The employer also cannot have any involvement in the seizure itself—i.e., the service of papers on the person subject to the seizure, as well as everything associated with the seizure itself, must be done by federal marshals, who “may” be assisted by local law enforcement. There are also restrictions on publicizing anything associated with the seizure, a bond mandate, and provisions for requesting encryption of anything seized.
Statute of Limitations: DTSA provides for a three-year statute of limitations, which begins to run when the party discovers, or should have discovered based on reasonable diligence, the misappropriation.
Remedies: Available remedies include injunctions, damages (potentially even “reasonable royalties”), and attorneys’ fees. Exemplary damages equaling twice actual damages may be awarded “if the trade secret is willfully and maliciously misappropriated.” Attorneys’ fees may be awarded if a claim is made in bad faith, a motion to terminate an injunction is made or opposed in bad faith, or if a trade secret is willfully and maliciously misappropriated. A reasonable royalty can be recovered “in exceptional circumstances” if a mere injunction would be “inequitable.” A reasonable royalty can also be recovered “in lieu of” damages.
Relation to State Law: DTSA specifically does not preempt state law dealing with trade secrets, and injunctions issued under DTSA cannot “conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” Therefore, a plaintiff could potentially avoid federal court by pleading a case solely under state law.
In light of DTSA’s requirements, updating the language of existing contracts and policy documents is necessary for businesses that wish to derive all of DTSA’s benefits.
The lawyers of Zashin & Rich have decades of combined experience in drafting non-disclosure agreements, workplace confidentiality policies, and similar documents. If you have questions about DTSA, trade secrets, or other employment policy concerns, please contact either Ami J. Patel (ajp@zrlaw.com) in Z&R’s Cleveland office (216.696.4441), or Brad E. Bennett (beb@zrlaw.com) in Z&R’s Columbus office (614-224-4411).
*Brad E. Bennett, an OSBA Certified Specialist in Labor and Employment Law, practices at the firm’s Columbus office. He is well versed in all areas of labor and employment law including trade secrets misappropriation and enforcement of post-employment restrictive covenants.
**Ami J. Patel practices in all areas of labor and employment law. She has extensive experience counseling employers on trade secrets misappropriation and enforcement of post-employment restrictive covenants.
Yesterday, President Obama signed into law the Defend Trade Secrets Act of 2016 (“DTSA”). As the law’s name suggests, the DTSA will have a major impact upon any business that seeks to protect its confidential information from inappropriate use, disclosure, and theft.
DTSA now provides access into the federal court system for anyone desiring to bring suit on most trade secrets violations. Since trade secret violation claims are commonly paired with claims for breach of non-competition and non-solicitation agreements, those latter claims now also will land in federal court far more often. DTSA will also require all employers to rewrite their non-disclosure agreements and employee handbooks, or else they will forfeit some of the DTSA’s key protections, such as the ability to recover exemplary damages and attorneys’ fees in certain situations.
Among the DTSA’s more interesting provisions:
Whistleblower / Anti-Retaliation Immunity: DTSA provides immunity to individuals who disclose trade secrets to government officials in the course of reporting suspected violations of the law. Furthermore, individuals who file a lawsuit against their employer for retaliation (which could include discrimination/harassment) may disclose trade secrets to their attorney and the court. This right might be construed broadly enough to encompass more than mere whistleblowing, but also to include ordinary retaliation claims under the discrimination laws to the extent that they are premised upon “opposition.”
Immunity Disclosure Requirements: Employers must disclose DTSA’s immunity provision to employees in any contract or agreement that governs the use of trade secrets or other confidential information (e.g., non-solicitation, confidentiality agreements). DTSA prevents employers who fail to comply with this notice requirement from obtaining exemplary damages or attorneys’ fees. This compliance item will require employers to revise any handbook provisions on confidentiality, as well as all employee non-disclosure agreements.
Inevitable Disclosure: DTSA specifically prohibits an employer from obtaining an injunction to prevent someone from entering into an employment relationship on the basis of the information that person knows. This provision effectively nullifies the “inevitable disclosure” doctrine that some courts had developed, under which an employer could seek to enjoin a former employee from working in a job that would inevitably result in the use of trade secrets, even if no evidence of actual disclosure existed.
Definitions: DTSA specifically excludes “reverse engineering” and “independent derivation” from the definition of what it means to acquire a trade secret by improper means.
Federal Seizure Remedy: In “extraordinary circumstances,” a federal court may authorize the ex-parte seizure (without notice to the other party) of property to prevent dissemination of trade secrets. This remedy is available in extremely limited circumstances, and the employer must meet a high burden to obtain this remedy. For example, the employer must demonstrate, via a verified complaint, that a temporary restraining order would be insufficient and that the wrongful holder of the trade secrets may destroy the trade secrets if given advance notice. DTSA also creates a cause of action for damages resulting from wrongful seizures. The employer also cannot have any involvement in the seizure itself—i.e., the service of papers on the person subject to the seizure, as well as everything associated with the seizure itself, must be done by federal marshals, who “may” be assisted by local law enforcement. There are also restrictions on publicizing anything associated with the seizure, a bond mandate, and provisions for requesting encryption of anything seized.
Statute of Limitations: DTSA provides for a three-year statute of limitations, which begins to run when the party discovers, or should have discovered based on reasonable diligence, the misappropriation.
Remedies: Available remedies include injunctions, damages (potentially even “reasonable royalties”), and attorneys’ fees. Exemplary damages equaling twice actual damages may be awarded “if the trade secret is willfully and maliciously misappropriated.” Attorneys’ fees may be awarded if a claim is made in bad faith, a motion to terminate an injunction is made or opposed in bad faith, or if a trade secret is willfully and maliciously misappropriated. A reasonable royalty can be recovered “in exceptional circumstances” if a mere injunction would be “inequitable.” A reasonable royalty can also be recovered “in lieu of” damages.
Relation to State Law: DTSA specifically does not preempt state law dealing with trade secrets, and injunctions issued under DTSA cannot “conflict with an applicable State law prohibiting restraints on the practice of a lawful profession, trade, or business.” Therefore, a plaintiff could potentially avoid federal court by pleading a case solely under state law.
In light of DTSA’s requirements, updating the language of existing contracts and policy documents is necessary for businesses that wish to derive all of DTSA’s benefits.
The lawyers of Zashin & Rich have decades of combined experience in drafting non-disclosure agreements, workplace confidentiality policies, and similar documents. If you have questions about DTSA, trade secrets, or other employment policy concerns, please contact either Ami J. Patel (ajp@zrlaw.com) in Z&R’s Cleveland office (216.696.4441), or Brad E. Bennett (beb@zrlaw.com) in Z&R’s Columbus office (614-224-4411).
*Brad E. Bennett, an OSBA Certified Specialist in Labor and Employment Law, practices at the firm’s Columbus office. He is well versed in all areas of labor and employment law including trade secrets misappropriation and enforcement of post-employment restrictive covenants.
**Ami J. Patel practices in all areas of labor and employment law. She has extensive experience counseling employers on trade secrets misappropriation and enforcement of post-employment restrictive covenants.
Tuesday, May 3, 2016
Ohio Supreme Court Extends Sunshine Law Restrictions to E-mail Communications Among Legislators
By Jonathan J. Downes* and George S. Crisci**
This morning, the Ohio Supreme Court decided (5-2) that Ohio’s Sunshine Law (R.C. 121.22) prohibits any private prearranged discussion of public business by a majority of the members of a public body regardless of whether the discussion occurs face-to-face, telephonically, by video conference, or electronically by e-mail, text, tweet or other form of communication. The dispute arose over e-mail exchanges among four school board members and school district employees that discussed responding to a newspaper editorial criticizing the school board’s policy change that required all communications between board members and staff first pass through the Superintendent or Treasurer. The policy change responded to the effort of the fifth board member to investigate improper expenditures by two athletic directors, which resulted in one resigning and both being required to reimburse the school district. One of the four board members participating in the e-mail exchanges drafted a response that the other three participating board members accepted. The board president then submitted the response to the newspaper, which published the response.
The case presents a classic exercise of how to interpret statutory language that does not specifically address the subject. The majority concluded that the definition of “meeting” under the Sunshine Law does not exclude electronic communications, while the dissent argued that the language does not include electronic communications within the statutory definition and that any revisions should be left to the General Assembly.
Given the widespread use of electronic communications among public sector legislators, this decision requires a reassessment of how e-mail can be used and probably significantly restricts such communications unless the General Assembly amends the law.
Zashin and Rich attorneys previously have cautioned the use of emails and are now assessing the immediate impact of the Ohio Supreme Court decision. We will be issuing within the next few days a more detailed analysis of the decision and its impact on communications and suggested language for electronic communications. All public agencies are advised to examine their policy regarding the use of emails and other electronic communications.
In the meantime, direct questions to George Crisci (gsc@zrlaw.com) in the Cleveland office (216-696-4441) and to Jonathan Downes (jjd@zrlaw.com) and Drew Piersall (dcp@zrlaw.com) in the Columbus office (614-224-4411).
*Jonathan J. Downes, an OSBA Certified Specialist in Employment and Labor Law and a Best Lawyer in America, has over 30 years of experience in practicing labor and employment law in Ohio and advising public sector clients regarding the requirements under Ohio’s open meetings (“Sunshine”) and public records laws. He represents cities, townships, counties, school districts, and public officials throughout the State of Ohio.
**George S. Crisci, an OSBA Certified Specialist in Employment and Labor Law and a Best Lawyer in America, likewise has over 30 years of experience in practicing labor and employment law in Ohio and has extensive knowledge of Ohio’s open meetings (“Sunshine”) and public records laws.
This morning, the Ohio Supreme Court decided (5-2) that Ohio’s Sunshine Law (R.C. 121.22) prohibits any private prearranged discussion of public business by a majority of the members of a public body regardless of whether the discussion occurs face-to-face, telephonically, by video conference, or electronically by e-mail, text, tweet or other form of communication. The dispute arose over e-mail exchanges among four school board members and school district employees that discussed responding to a newspaper editorial criticizing the school board’s policy change that required all communications between board members and staff first pass through the Superintendent or Treasurer. The policy change responded to the effort of the fifth board member to investigate improper expenditures by two athletic directors, which resulted in one resigning and both being required to reimburse the school district. One of the four board members participating in the e-mail exchanges drafted a response that the other three participating board members accepted. The board president then submitted the response to the newspaper, which published the response.
The case presents a classic exercise of how to interpret statutory language that does not specifically address the subject. The majority concluded that the definition of “meeting” under the Sunshine Law does not exclude electronic communications, while the dissent argued that the language does not include electronic communications within the statutory definition and that any revisions should be left to the General Assembly.
Given the widespread use of electronic communications among public sector legislators, this decision requires a reassessment of how e-mail can be used and probably significantly restricts such communications unless the General Assembly amends the law.
Zashin and Rich attorneys previously have cautioned the use of emails and are now assessing the immediate impact of the Ohio Supreme Court decision. We will be issuing within the next few days a more detailed analysis of the decision and its impact on communications and suggested language for electronic communications. All public agencies are advised to examine their policy regarding the use of emails and other electronic communications.
In the meantime, direct questions to George Crisci (gsc@zrlaw.com) in the Cleveland office (216-696-4441) and to Jonathan Downes (jjd@zrlaw.com) and Drew Piersall (dcp@zrlaw.com) in the Columbus office (614-224-4411).
*Jonathan J. Downes, an OSBA Certified Specialist in Employment and Labor Law and a Best Lawyer in America, has over 30 years of experience in practicing labor and employment law in Ohio and advising public sector clients regarding the requirements under Ohio’s open meetings (“Sunshine”) and public records laws. He represents cities, townships, counties, school districts, and public officials throughout the State of Ohio.
**George S. Crisci, an OSBA Certified Specialist in Employment and Labor Law and a Best Lawyer in America, likewise has over 30 years of experience in practicing labor and employment law in Ohio and has extensive knowledge of Ohio’s open meetings (“Sunshine”) and public records laws.
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