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In this regard, this blog is the last Part of our series, “Key Employment Law Issues for Businesses & Companies in New York.” In Part XXX, we reviewed why it is crucial to consider the issue of “whistleblowing” when drafting confidentiality covenants and mentioned that an employer should, as a best practice, make sure that language through which “whistleblowing,” in every sense of the concept, has been explicitly excepted when provisions concerning confidentiality require being included in agreements, as well as in other covenants by which whistleblowing could be deterred.

We also added that pursuant to 18 U.S.C. § 1833, the Defend Trade Secrets Act (DTSA), as discussed in another blog titled “Provisions for Notice & Whistleblowing under the DTSA” and accessible through https://milettilaw.com/provisions-for-notice-whistleblowing-under-the-dtsa/, requires exceptions and provisions that explicitly state that employees are allowed to participate in government investigations and/or cooperate with government agencies, even if it requires them to disclose trade secrets or confidential information, to be carved out in confidentiality covenants.

In this blog titled “N.Y. Law on Determining if Information Constitutes Trade Secrets,” we have reviewed several factors that are considered by New York courts when determining whether information, which may be allegedly stolen, misappropriated, disclosed, or used, constitutes a trade secret.

N.Y. Law on Determining if Information Constitutes Trade Secrets

In our blog titled “Statutory Definitions & Types of Info Considered Trade Secrets” and we provided the statutory definitions under the Defend Trade Secrets Act of 2016 (DTSA) or most state Uniform Trade Secret Acts (UTSA) (including additional local trade secret statutes) and types of information that courts may consider to constitute trade secrets. Regarding this topic, we mentioned that before implementing protective measures, employers are required by the law to identify the kinds of trade secrets warranting protection. Accordingly, we added that examples of trade secrets that could be stored electronically and subject to cybersecurity measures include, but are not limited to, (a) employee and/or customer (or potential customer) lists, (b) computer codes, recipes, formulae, and design blueprints, (c) business and marketing plans, (d) spreadsheets and databases that contain logistical statistics and data, (e)supply and customer service requirements or preferences, (f) profits, billing, pricing, and cost methodology and information, and (g) employee contracts or additional information on benefits, compensation, and wages.

In light of these types of information, courts in New York, based on the law, will consider a number of factors (See Ivy Mar Co. v. C.R. Seasons Ltd., 907 F. Supp. 547, 554 (E.D.N.Y. 1995) when required to determine if information constitutes a trade secret. Some of these factors include but are not limited to (1) the difficulty or ease of proper duplication or acquisition of the information by other parties, (2) the amount of effort or money expended when the information was being developed by the employer, (3) the value the information carries for the employer and its rival(s)/competitor(s), (4) the measures that have been taken by the employer to ensure the secrecy of the information has been protected, (5) the degree to which the employees or other parties close/related to the employer knows about or are conversant with the information, and (6) the degree to which other parties/individuals outside the employer’s business know about or are conversant with the information.

Notably, in the blog mentioned above, we also noted that for information to qualify as a trade secret, employers are obligated under both the DTSA and UTSA to take “reasonable measures” or make “reasonable efforts” to ensure the safety and secrecy of such confidential information. This goes without saying that technically, the type of trade secret being protected may determine what constitutes a reasonable measure and that a combination of security measures usually makes up reasonable efforts. However, it is crucial to note that there is a carve-out under the DTSA, which immunizes an individual’s disclosure of a trade secret from liability under both state and federal trade secret law. This implies that as long as a disclosure of trade secrets is made solely with the intention to investigate or report a law violation or made in confidence to government investigators, the exception or provision in a confidentiality covenant should make it clear that the employee involved in the disclosure would neither be civilly or criminally liable.

With that, we have concluded our series “Key Employment Law Issues for Businesses & Companies in New York” and hope we have provided key insights and crucial information regarding the employment law issues discussed in individual blogs. Be on the lookout for the next blog titled “Introduction to Key Workplace Policies and Employee Handbooks,” which will be Part I of a new series called “Key Workplace Policies and Employee Handbooks.”

As usual, stay tuned for more legal guidance, training, and education. In the interim, if there are any questions or comments, please let us know at the Contact Us page!

Always Rising Above the Bar,

Isaac T.,

Legal Writer, Author, and Publisher.