April 25, 2018 In-House Counsel Conference

[Insert Sponsor Name and/or Logo]

RECENT UPDATES IN LABOR AND

EMPLOYMENT DAMAGES: FROM THE

PERSPECTIVE OF FORENSIC ACCOUNTANTS

Presenters:

• Joseph W. Lesovitz, CPA/ABV/CFF, CFA, CFE – Citrin

Cooperman

• Colleen S. Vallen, CPA/CFF – Citrin Cooperman

• Chris Turk, Esquire

Overview

• Trade Secret Law – Generally

• Uniform Trade Secrets Act – States

• Defend Trade Secrets Act – Federal

• Remedies

• Whistleblower Protection

• FLSA

• Overview

• WHD Pilot Program

What is a Trade Secret

• Information

• Subject of reasonable efforts to maintain secrecy

• Has independent economic value from not being generally known or

ascertainable

Statutory Definitions

• Uniform Trade Secrets Act (“UTSA”)

• Information, such as a formula, pattern, compilation, program device,

method, technique, or process

• Defend Trade Secrets Act (“DTSA”)

• Financial, business, scientific, technical, economic, or engineering

information, including patterns, plans, compilations, program devices,

formulas, designs, prototypes, methods, techniques, processes,

procedures, programs, or codes" regardless of how stored and whether

tangible

Trade Secrets

Commonly Litigated Trade Secrets

• Customer lists

• Marketing plans

• Sales data

• Detailed information about

customers

• Recipes

• Chemical compounds

• Manufacturing processes

Trade Secret Civil Actions

State Law

• UTSA

• Unfair competition

• Breach of contract

• Tortious interference

• Breach of duty of loyalty

• Breach of fiduciary duty

• Defamation

Federal Law

• Computer Fraud and Abuse Act

(“CFAA”)

• DTSA

Defend Trade Secrets Act of 2016

• Federal private right of action

• Grants original jurisdiction to federal courts

• Covers trade secrets used in interstate or foreign commerce

• Effective May 11, 2016 for any misappropriation after that date

Benefits of Federal Action

• Injunctions

• Uniform body of federal law

• Federal court resources / IP experience /experience of the bar

• Procedural advantages (service, discovery)

Key Provisions of DTSA

• Mostly, consistent with UTSA

• Three-year statute of limitations

• No state law preemption

• Differences with UTSA

• Ex parte seizure provision

• Whistleblower protection

DTSA: Remedies

• Injunctive relief

• No prevention of employment relationship (e.g. for “inevitable

disclosure”)

• None based on “inevitable disclosure”

• None conflicting with state law

• Actual damages / unjust enrichment

• Reasonable royalty

• Exemplary (punitive) damages

• Reasonable attorneys’ fees

Damages – Lost Profits

• Lost profits are based upon the alleged harm suffered by the

Plaintiff(s)

• Calculated as the amount necessary to place the Plaintiff in the

position that it would have been had the event not occurred

• Only “Net Lost Profits” are allowable in economic damages – (Net

Lost Profits = Lost Revenues – Avoided/Incremental Costs)

Disgorgement Damages

• Defendant’s unjust enrichment resulting from the misappropriation

• Plaintiff typically has the burden to quantify the Defendant’s revenue

from the trade secrets

• Defendant typically has the burden to prove (1) portion of the

revenue that is not attributable to the trade secrets and (2) the costs

that should be deducted from revenues

• Profits = Defendant’s Revenues less Defendant’s Costs

Reasonable Royalty

• Hypothetical Negotiation

• Willing licensor and willing licensee

• Incremental benefit of licensing over next best alternative

• Royalty Structure

• Lump sum

• Percentage of net sales

• Amount per unit

• Georgia-Pacific Corp. v. U.S. Plywood Corp

Trade Secret Trends: Case Activity by Type

Source: Trends in Trade Secret Litigation Report 2017 – Stout Advisory.

Trade Secret Trends: Frequency of Claims

Accompanying Trade Secret Misappropriation

Source: Trends in Trade Secret Litigation Report 2017 – Stout Advisory.

Trade Secret Trends: Proportion of Court

Rulings by Prevailing Party

Source: Trends in Trade Secret Litigation Report 2017 – Stout Advisory.

Trade Secret Trends: Average Award by

Prevailing Party

Source: Trends in Trade Secret Litigation Report 2017 – Stout Advisory.

Trade Secret Trends: Number and Rate of

Expert Challenges by Circuit

Source: Trends in Trade Secret Litigation Report 2017 – Stout Advisory.

Recent Case Study

• Waymo LLC v. Uber Technologies, Inc.; Ottomotto LLC; Otto Trucking LLC; No. 3:17-cv-00939, 2017

• Violation of DTSA, California UTSA (“CUTSA”), Patent Infringement, et al.

• Waymo is a subsidiary of Google

• Technology relates to Waymo’s self-driving car technology, including the development of the cost effective and high performing laser sensors known as LiDAR.

• A former manager of Waymo’s self-driving car project downloaded 14,000 highly confidential and proprietary files shortly before his resignation in January 2016.

• Installed specialized software on his computer to download information from server

• Attempted to erase any forensic fingerprint of his theft

Recent Case Study - Continued

• Informed colleagues of his plans to set up a new, self-driving company, which became Ott

• Former supply chain manager and hardware engineer for Waymo leave in July 2016 to join Otto and take with them confidential supply chain information and other confidential manufacturing information

• Otto was eventually acquired by Uber in August 2016 for $680 million.

• Lawsuit filed in February 2017

• Waymo reportedly seeking damages of $1.859 billion calculated based on an estimate of Ober’s unjust enrichment from Uber’s trade secret misappropriation

• Trial began February 2018

• Parties settled – Waymo received equity in Uber worth approximately $245 million

What is the Fair Labor Standards Act (FLSA)?

• Federal law which establishes minimum wage, overtime pay eligibility, recordkeeping, and child labor standards affecting full-time and part-time works in the private sector and in federal, state, and local goverments

• Overtime-eligible employees must be compensated with overtime pay or compensatory time for all hours worked over 40 in a single workweek

• For all hours worked in excess of 40 during each work week, employees will receive overtime at the rate of one and one-half times the employee’s regular rate

• In order for an exemption to apply, an employee's specific job duties and salary must meet all the requirements of the Department of Labor's regulations

Recent Trends in FLSA: Value of Top 10

Wage & Hour Class Action Settlements

Source: 14th Annual Workplace Class Action Litigation Report – Seyfarth Shaw

Recent Trends in FLSA: 2017 FLSA Conditional

Certification Motions and Decertification Motions

Source: 14th Annual Workplace Class Action Litigation Report – Seyfarth Shaw

Recent Trends in FLSA: 2014 - 2017 FLSA Conditional

Certification Motions and Decertification Motions

Source: 14th Annual Workplace Class Action Litigation Report – Seyfarth Shaw

Recent Trends in FLSA: FLSA Filings in Federal

Courts

Source: 14th Annual Workplace Class Action Litigation Report – Seyfarth Shaw

Recent Developments – PAID Program

• Payroll Audit Independent Determination (PAID) program

• New pilot program established to facilitate resolution of potential

overtime and minimum wage violations under the FLSA

• Primary objective is to resolve such claims expeditiously and without

litigations, improve employers’ compliance with overtime and

minimum wage obligations, and ensure that more employees

received the back wages they are owed faster

• Employers are encourage to conduct audits and to self-report

violations

PAID Program – Eligible Employer

• An eligible employer who wishes to participate must:

• Specifically identify the potential violations;

• Identify which employees were affected;

• Identify the timeframes in which each employee was affected; and

• Calculate the amount of back wages the employer believes are owed to

each employee.

PAID Program – Required Information

• The employer will be required to provide WHD with:

• Each of the calculations described above—accompanied by evidence and

explanation;

• A concise explanation of the scope of the potential violations for possible

inclusion in a release of liability;

• A certification that the employer reviewed all of the information, terms, and

compliance assistance materials;

• A certification that the employer is not litigating the compensation practices at

issue in court, arbitration, or otherwise, and likewise has not received any

communications from an employee’s representative or counsel expressing

interest in litigating or settling the same issues; and

• A certification that the employer will adjust its practices to avoid the same

potential violations in the future.

PAID Program – Conclusion

• After the conclusion of the process, the employer must make back

wage payments

• If an employee accepts the back wages, the employee will waive

their rights to a private cause of action under the FLSA for the

identified issues and timeframe

• An employee that chooses not to accept back wages will not be

impacted

Contact Information

Joseph W. LesovitzPartner, Valuation and Forensic Services

Citrin Cooperman & Company

+1 267 476 0060

jlesovitz@citrincooperman.com

Colleen S. VallenPartner, Valuation and Forensic Services

Citrin Cooperman & Company

+1 215 545 4800

cvallen@citrincooperman.com

Chris Turk, Esquirechris.turk@gmail.com