Employment agreements generally include non-disclosure provisions (“NDAs”).  Without an NDA, an employer may not be able to stop an employee from misappropriation of company trade secrets or other confidential information. By signing an NDA, an employee agrees to keep the details of his or her work confidential.

But what about illegal activity that employees may witness? Are they prevented from reporting that too, for fear of breaching their NDAs? Under the Defend Trade Secrets Act 2016 (“DTSA”), signed into law by President Obama on May 13, 2016, the short answer is “No.” 

The DTSA expressly states that an individual cannot be held criminally or civilly liable under any federal or state trade secret law if they disclose a trade secret “(A)…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.”(18 U.S.C. § 1833.) In other words, DTSA provides immunity to “whistle-blowers.”

The DTSA requires employers to alert their employees about the trade secret "whistle-blower immunity" clauses in any employee contract or agreement that is entered into or updated after May 13, 2016.  In practice, this means employers should revise employment agreements, alert anyone who has signed one (e.g., employees, third-party contractors, and consultants) about the new law, and have them sign a revised agreement.  Each company will need to determine its own appropriate revised NDA language.  There is no particular penalty per se for non-compliance, but failure to comply may prevent the employer from recovering exemplary damages or attorney fees in an action brought under the DTSA for theft of trade secrets against an employee to whom no notice was provided.

While the full impact of DTSA on the area of trade-secrets law remains to be seen, one thing is clear: Employers should ensure that their NDAs comply with the new law. And that means changing employment agreements - right now. 

New York litigators are familiar with CPLR § 2104, which requires all stipulations, including stipulations of settlement, to be “in a writing subscribed” by a party or the party’s attorney.  Thus, to ensure that the settlement of a dispute is binding, an attorney should obtain the settlement terms in writing and have them “subscribed” by the opposing party or that party’s attorney.   Under New York law, however, this requirement does not necessarily require a physically signed formal settlement agreement.  In the world of electronic communication, New York courts have generally expanded the scope of what constitutes a "writing subscribed by him or his attorney" pursuant to CPLR §2104 to include certain electronic communications, such as email. 
 
For example, in Forcelli v. Gelco, 109 A.D.3d 244, 251 (2d Dept. 2013), the Court stated that "it would be unreasonable to conclude that email messages are incapable of conforming to the criteria of CPLR § 2104 simply because they cannot be physically signed in the traditional fashion.”  As a result, the Court held that an email message containing the material terms of a settlement and the typed name of the sender (as opposed to an automatically generated signature line) constituted a subscribed writing within the meaning of CPLR §2104.
 
The writing and subscription requirement, however, does not apply if the parties’ dispute has not resulted in the filing of “an action.”  If a dispute between parties has not yet proceeded to actual litigation, the traditional rules governing contract formation apply.  A settlement agreement is enforceable where there is an offer, acceptance of the offer, consideration, mutual assent, and an intent to be bound.  See 22 N.Y. Jur. 2d, Contracts § 9; Kowalchuk v. Stroup, 61 A.D.3d 118, 121 (1st Dep’t 2009).  To determine whether there has been a meeting of the minds demonstrating mutual assent and intent to be bound, a court should examine the words and deeds that constitute objective signs in a given set of circumstances. See 22 N.Y. Jur. 2d, Contracts § 28; Kowalchuk, 61 A.D.3d at 121.
 
Significantly, provided there is objective evidence establishing that the parties agreed on the terms and intended to be bound, a settlement occurring before a lawsuit is filed need not be signed in order to be an enforceable agreement, whether oral or written.  See, e.g., Mun. Consultants & Publishers, Inc. v. Town of Ramapo, 47 N.Y.2d 144, 148-49 (1979); Kowalchuk, 61 A.D.3d at 118.  Once formed, a settlement agreement is binding and enforceable even when one party later refuses to execute a formal written agreement.  Forcelli, 109 A.D.3d at 247-48 (finding binding e-mail agreement, where defendant sent e-mail stating in pertinent part “Per our phone conversation today, May 3, 2011, you accepted my offer of $230,000 to settle this case. . . . You also agreed to prepare the release . . .  Please forward the release and dismissal for my review. Thanks Brenda Greene.”); Kowalchuk, 61 A.D.3d at 121-22, 124 (holding that settlement agreement was formed by initial e-mail communications between the parties’ counsel even though parties were subsequently negotiating formal settlement agreement).
 
In the event that a party does not want to be bound until a formal settlement agreement and release is executed, the party’s attorney should make it clear that the contract is not binding until a formal document is completed and executed.  See, e.g., Kowalchuk, 61 A.D.3d at 123.