An Update on Employment Law - New Overtime Regulations and the Defend … · An Update on...

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An Update on Employment Law -

New Overtime Regulations andthe Defend Trade Secrets Act

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ogletreedeakins.com

The Final Overtime Regulations: What The NewMinimum Salary Requirements Mean for Employers

Presented by

Michael H. Cramer

Atlanta / Austin / Berlin / Birmingham / Boston / Charleston / Charlotte / Chicago / Cleveland / Columbia / Dallas / Denver / Detroit (Metro) / GreenvilleHouston / Indianapolis / Jackson / Kansas City / Las Vegas / London / Los Angeles / Memphis / Mexico City / Miami / Milwaukee / MinneapolisMorristown / Nashville / New Orleans / New York City / Orange County / Philadelphia / Phoenix / Pittsburgh / Portland / Raleigh / RichmondSan Antonio / San Diego / San Francisco / Seattle / St. Louis / St. Thomas / Stamford / Tampa / Toronto / Torrance / Tucson / Washington, D.C.

www.ogletreedeakins.com

Overview

Effective Date

New Minimum Salary Threshold

Automatic Adjustment Provision

Highly Compensated Employee Compensation

Nondiscretionary Payment to Meet Salary Threshold

Actions Employers Can Take Now

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Effective Date

December 1, 2016

Approximately 180 days from issuance of the finalregulations

EFFECTIVE DATE

DECEMBER 1, 2016

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New Minimum Salary Threshold $913 a week

More than 2x current $455 a week

$1,826 biweekly

$1,978 semi-monthly

$3,956 monthly

$47,476 annually

Applies to Executive, Administrative, Professional andComputer Employee Exemptions

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New Minimum Salary Threshold

40th percentile of weekly earnings of full-time salariedworkers in the lowest wage census region (South)

Census Region 40th Percentile of Earnings ofFull-Time Salaried Workers

(4th Quarter 2015)South $913

Midwest $994

Northeast $1,036

West $1,050

All Census Regions $972

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New minimum salary threshold will be automaticallyadjusted every 3 years based on the 40th percentile ofweekly earnings of full-time salaried workers in thelowest wage census region

Proposed regulations had considered an annual adjustment

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January 1, 2020 is first adjustment effective date

Wage growth analysis in the South projects new salarylevel of $984 per week ($51,168 annually) in 2020

Updated salary threshold to be published at least 150days before effective date

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Highly Compensated Employee(HCE) Compensation Total annual compensation level = 90th percentile of earnings of

full-time salaried workers nationally

$134,004 annually, based on 4th quarter of 2015

Must be paid at least $913 per week

No change to annual “catch up” payment at the end of the year orwithin one month after the end of year

Total Annual Compensation Adjusted Every 3 Years EffectiveJanuary 1, 2020

Estimated HCE total annual compensationas of January 1, 2020 is $147,524

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Nondiscretionary Payment to MeetSalary Threshold

10% of minimum salary may be nondiscretionary bonus,incentive, and commission payments

Nondiscretionary payments must be paid quarterly or morefrequently

“Catch up” payment to meet 10% must be by made by nextpay period after end of quarter

“Catch up” payment counts only toward prior quarter’ssalary amount and not quarter in which paid

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The Salary Basis Test

Paid on a “salary basis” means—

Employee must receive each pay period a predeterminedamount constituting all or part of the employee’scompensation; and

The predetermined amount may not be reduced because ofvariations in the quality or quantity of work performed

Subject to a few permissible deductions, employee must bepaid full salary regardless of number of hours or days worked

Do not have to pay if no work performed during theworkweek

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No Salary Requirements

Salary Level and Salary Basis Tests Do Not Apply To:

Outside sales exempt employees

Practicing physicians

Practicing attorneys

Teachers

Computer exempt employees paid at least $27.63 per hour

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Primary Duties Test

There were no changes to the primary duties test

No new specific occupational examples provided

… at least for now…

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Evaluate jobs likely to be impacted by new regulations

Consider whether positions below $47,476 shouldreceive a salary increase or be reclassified as non-exempt

Consider creation of new pay grades/job titles

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Consider pay and rate for jobs to be reclassified

Assess impact of reclassification on:

Benefit programs

Increased compensation costs

Managing overtime

Morale and stigma of non-exempt classification

Inconsistent classifications (e.g., based on geography)

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Concerns to Address

“Off-the-clock” work performed by reclassifiedemployees to get work done

Temptation to use independent contractors, temporaryemployees

Possible wage compression concern

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Consider alternatives to raising the salary level

Fluctuating workweek method of payment

BELO agreements

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Devise communication plan for affected employees

Train affected employees (and managers) ontimekeeping and other policies

Modify HR, payroll processing and IT systems

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Illinois Minimum Wage Lawand the New Part 541 Rules

Similar concepts – exemptions from IMWL for “whitecollar” and outside salespersons

Illinois employers must comply with both federal andIllinois law

Illinois lags behind new federal regulations – at leastfor now

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Congressional and Other Challenges

Protecting Workplace Advancement and OpportunityAct (H.R. 4773 and S. 2707)

Congressional Review Act Resolution

Amendments to Appropriations Bills

Possible Litigation

Administrative Procedure Act

Regulatory Impact Analysis

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Trade Secrets Protection With Teeth:The Defend Trade Secrets Act of 2016

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ogletreedeakins.com

Presented by

Tobias E. Schlueter

© 2016, Ogletree, Deakins, Nash, Smoak & Stewart, P.C.



Overview of IssuesI. Background

A. Light Reading

B. Where Does the DTSA Fit in the Current Landscape?

C. Why is it Important?

II. DTSA’s Key Provisions

A. Ex Parte Seizure

B. Immunities / Notice Provisions

C. How DTSA Contrasts with State Law

III. What Should You Do Now?

A. Audit Trade Secret Protections

B. Review and Enhance Onboarding and Exit Processes

C. Revise Agreements and Policies

D. Act Promptly When Issues Arise

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Light Reading…

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Where Does DTSA Fit In CurrentLandscape?



Why is the DTSA Important?

Gets Litigants StraightInto Federal Court!

Provides New Tools

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Ex Parte Seizure of Property

Without notice or answer byaccused

Any time, especially early inthe suit

Specific standards – high bar

Based on evidence at time ofseizure

Penalties for getting it wrong



Immunities – Section 7(B)Investigation / Private Attorney

(1)(A) - An individual shall not be held criminally or civillyliable under any Federal or State trade secret law for thedisclosure of a trade secret that:

is made in confidence to a Federal, State, or localgovernment official, either directly or indirectly, or toan attorney; and

solely for the purpose of reporting or investigating asuspected violation of law; or

(1)(B) - is made in a complaint or other document filedin a lawsuit or other proceeding, if such filing is madeunder seal.

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Immunities – Section 7(B)Whistleblower Action

(2) - An individual who files a lawsuit for retaliation by anemployer for reporting a suspected violation of law maydisclose the trade secret to the attorney of the individualand use the trade secret information in the courtproceeding, if the individual—

files any document containing the trade secret underseal; and

does not disclose the trade secret, except pursuant tocourt order.



Immunities – NoticeNotice

May 11, 2016

“Employee” = consultantand contractor

State and federal law

Failure to give noticeimpacts DTSA remediesonly

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Sample Notice Language

Whether to include in agreement or referto a policy?

Most conservative – mirrors the statute

Conservative – tracks the statute

Less conservative – generalized language

More risky – condensed

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Impact on Inevitable Disclosure?

Information someone“merely knows” vs.evidence ofmisappropriation

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Contrasts with State Laws

Does not preempt state law – exceptimmunities

Does not preempt other causes of action thatarise under the same common nucleus offacts, unlike the UTSA

Does not require pre-discovery trade secretidentification



What Should You Do Now?

Good time to audittrade secret corporatehygiene fromonboarding to exiting

Modify policies(notice)

Modify agreements(notice or reference)

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Confidentiality is Key!

Who has access?

What secrecy measuresare in place?

What is the value ofinformation tocompany?

What is the value ofinformation tocompetitors?



Questions?

CONFIDENTIAL CLIENT MEMORANDUM

FROM: Ogletree Deakins

DATE: May 17, 2016

SUBJECT: Defend Trade Secrets Act of 2016 Immunity and Notice

IMMUNITY

Section 7 of the Defend Trade Secrets Act of 2016 (“DTSA” or “Act”) provides criminal and civil immunity from liability under certain circumstances under both the Act and state law to “employees” who disclose a trade secret to the government or in a court filing. “Employee” is defined under the Act to include “any individual performing work as a contractor or consultant for an employer.” Specifically, the Act provides that employees may disclose trade secrets:

(1) in confidence, either directly or indirectly, to a Federal, State, or local government official, or to an attorney, “solely for the purpose of reporting or investigating a suspected violation of law,” or

(2) “in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.”

Individuals who file retaliation lawsuits for reporting a suspected violation of law may also use and disclose related trade secrets in the following manner:

(1) the individual may disclose the trade secret to the employee’s attorney, and

(2) the individual may use the information in the court proceeding, as long as the individual files documents containing the trade secret under seal, and does not otherwise disclose the trade secret “except pursuant to court order.”

NOTICE

Employers are required to provide employees with “notice of the immunity” described above “in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.” “Notice” in such contracts or agreements may consist of a “cross-reference to a policy document provided to the employee that sets forth the employer’s reporting policy for a suspected violation of law.” Employers that fail to comply with the notice

Confidential Client MemorandumRE: DTSA of 2016 Immunity and NoticeMay 17, 2016Page 2

requirement waive their right to seek exemplary damages and attorneys’ fees in a misappropriation of trade secrets action under the Act. The notice requirement is also limited to “contracts and agreements that are entered into or updated after the date of enactment of” the DTSA. Finally, the notice requirements do not affect acts that are “otherwise prohibited by law, such as the unlawful access of material by unauthorized means” (e.g., the Computer Fraud and Abuse Act).

NOTICE LANGUAGE OPTIONS

Following are four examples of notice language, starting with the most conservative and ending with the most risky.

Example A: Most Conservative Notice Language—Mirrors the Statute

Because this is a brand new statute, the safest “notice” would be a cut-and-paste of the actual statute:

IMMUNITY FROM LIABILITY FOR CONFIDENTIAL DISCLOSURE OF A TRADE SECRET TO THE GOVERNMENT OR IN A COURT FILING.

(1) IMMUNITY. 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.

(2) USE OF TRADE SECRET INFORMATION IN ANTI-RETALIATION LAWSUIT. 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.


Example B: Conservative Notice Language—Tracks with the Statute

The following is a fairly robust notice provision that tracks, but does not mirror, the statute:

Immunity under the Defend Trade Secrets Act of 2016

The federal Defend Trade Secrets Act of 2016 provides immunity in certain circumstances to Company employees, contractors, and consultants for limited disclosures of Company Trade Secrets. Specifically, Company employees, contractors, and consultants may disclose Trade Secrets:

(1) in confidence, either directly or indirectly, to a Federal, State, or local government official, or to an attorney, “solely for the purpose of reporting or investigating a suspected violation of law,” or

(2) “in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.”

Additionally, Company employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may also use and disclose related Trade Secrets in the following manner:

(1) the individual may disclose the Trade Secret to his/her attorney, and

(2) the individual may use the information in related court proceeding, as long as the individual files documents containing the Trade Secret under seal, and does not otherwise disclose the trade secret “except pursuant to court order.”

Example C: Less Conservative Notice Language—More Generalized

Company employees, contractors, and consultants may disclose Trade Secrets in confidence, either directly or indirectly, to a Federal, State, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law, or in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, Company employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may disclose related Trade Secrets to their attorney and use them in related court proceedings, as long as the individual files documents containing the Trade Secret under seal and does not otherwise disclose the Trade Secret except pursuant to court order.


Example D: More Risky Notice Language—Condensed

This is another example of an even more minimalist approach to the notice provision.

Employee shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a Trade Secret that: (1) is made (a) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and (b) solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Disclosures to attorneys, made under seal, or pursuant to court order are also protected in certain circumstances under 18 U.S.C. 1833.

Please note that in this last example, the language in Section 7(b)(2) of the Act is only referred to in passing as a way to avoid mentioning a “retaliation lawsuit” directly. We cannot say whether, in the circumstances covered by this subsection, this notice would survive a challenge. It is also important to remember that the notice provision only affects an employer’s ability to recoverexemplary damages and attorneys’ fees in a misappropriation of trade secrets claim under the Act.

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RECOMMENDED ADDITIONAL SEC WHISTLEBLOWER LANGUAGE

(For U.S. Public Companies and SEC Regulated Entities)

While not required by the Act, we recommend adding the following language for employers thatdo not already have whistleblower language in an ethics policy. This language can be placeddirectly after any of the examples above.

Nothing herein is intended to be or will be construed to prevent, impede, or interfere with an employee’s right to respond accurately and fully to any question, inquiry, or request for information regarding the Company or his or her employment with the Company when required by legal process, or from initiating communications directly with, or responding to any inquiry from, or providing truthful testimony and information to, anyFederal, State, or other regulatory authority in the course of an investigation or proceeding authorized by law and carried out by such agency. Employees are not required to contact the Company regarding the subject matter of any such communications before they engage in such communications.

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PLEASE NOTE: The above examples are not intended to be used without consulting with an Ogletree attorney who can examine your particular circumstances and the proper application of notice language. Questions may be directed to:

John C. Glancy: [email protected]; 864.240.8278,

Tobias Schlueter: [email protected]; 312.558.1225, or

Danielle Ochs: [email protected]; 415.536.3429

24852273.1

Michael H. CramerShareholder Chicago

312-558-1240

[email protected]

Mr. Cramer counsels and represents employers on a variety of labor and employment-related legal

matters. He has advised clients ranging from small non-profits to Fortune 500 companies on

employment matters, negotiated cost-effective resolutions to troubling disputes, and litigated to victory.

Based on extensive interviews of in-house attorneys, the BTI Consulting Group named Mr. Cramer a BTI

Client Service All-Star—one of just 29 Labor and Employment attorneys in the United States to achieve

this recognition in 2015. Based on other peer surveys, Mr. Cramer has achieved Martindale-Hubbell’s

highest peer review rating (AV), and repeatedly has been named among the Best Lawyers in America, a

Leading Lawyer, and an Illinois Super Lawyer. Mr. Cramer has been elected to The College of Labor

and Employment Lawyers, an organization of labor and employment attorneys in practice for more than

20 years who meet “the highest professional qualifications and ethical standards.”

Mr. Cramer’s employment litigation practice includes discrimination and harassment cases, wage and

hour collective actions, and restrictive covenant litigation. Examples of his work include:

Defending employers including retail chains, restaurant chains, manufacturers, and staffing

companies in numerous class and collective actions involving alleged wage and hour violations;

Defeating a former employee’s attempt to certify a class of more than 200 employees alleging

denial of overtime pay, then defeating the remaining plaintiff’s claims at trial;

Winning summary judgment on behalf of employers in numerous discrimination and retaliation suits;

Defeating a 27-count federal lawsuit brought by the former chief executive of a non-profit

organization against the entity and each of its board members;

Defeating an age and sex discrimination suit in a federal jury trial;

Defeating a former high-ranking executive's suit claiming he was entitled to millions of dollars under

an executive severance plan; and

Assisting clients to reduce EEOC charges and lawsuits by counseling HR and management on

policies and potentially volatile disciplinary and termination decisions.

Mr. Cramer often conducts training for clients’ executives, HR professionals and entire workforces on

topics including anti-harassment, internal investigations, workplace bullying, and professionalism. He is

a frequent speaker and writer on employment law topics through organizations including the Association

of Corporate Counsel, the Illinois Institute for Continuing Legal Education, and the Northern Illinois

Society for Human Resources Management.

Admitted to PracticeIllinois

U.S. District Court, Central and Northern

Districts of Illinois

U.S. District Court, Eastern District of

Michigan

U.S. Court of Appeals, Seventh Circuit

EducationJ.D., University of Michigan Law School,

1988

B.A., with distinction, University of

Michigan, 1985

Tobias E. SchlueterShareholder Chicago

312-558-1225

[email protected]

Admitted to PracticeIllinois

U.S. District Court, Central and Northern

Districts of Illinois

U.S. Court of Appeals, Seventh Circuit

EducationJ.D., cum laude, The John Marshall Law

School, 2002

B.A., Political Science, Franciscan

University, 1996

Mr. Schlueter is a strategic advocate and litigator for businesses in employment (including

discrimination, retaliation, wage & hour, ADA, FMLA etc.) and unfair competition matters (including

restrictive covenants (non-compete, non-solicit and confidentiality), trade secrets, duties of loyalty,

tortious interference, and conspiracy, etc.). Mr. Schlueter has a proven track record in litigating high

stakes matters involving temporary restraining orders and other injunctive relief. He also has significant

experience trying FINRA arbitration matters. He is a member of the steering committee for Ogletree’s

Unfair Competition and Trade Secrets Group.

Mr. Schlueter was selected as a Best Lawyer in America for 2017 in Employment Law – Management.

He was named as an Illinois Rising Star for 2011, 2012, 2013 and 2014. The Rising Star distinction is

awarded to attorneys under the age of 40 based on 12 indicators of peer recognition and professional

achievement.

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