RECENT UPDATES IN LABOR AND EMPLOYMENT DAMAGES… · EMPLOYMENT DAMAGES: ... (“CFAA”) • DTSA....
Transcript of RECENT UPDATES IN LABOR AND EMPLOYMENT DAMAGES… · EMPLOYMENT DAMAGES: ... (“CFAA”) • DTSA....
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
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
Colleen S. VallenPartner, Valuation and Forensic Services
Citrin Cooperman & Company
+1 215 545 4800
Chris Turk, [email protected]