This week, the Connecticut Supreme Court issued an opinion which upheld a state common law negligence action against a healthcare provider for violation of privacy and confidentiality laws and regulations using as evidence of the standard of care the Health Information Portability and Accountability Act (HIPAA) and its accompanying regulations. The court denied defense arguments that HIPAA, which expressly does not provide a private right of action, preempts such state law negligence claims.

The plaintiff was a patient of the defendant and had been provided with a copy of defendant’s privacy policy, which provided that protected health information would not be released or disclosed without the patient’s authorization. Shortly thereafter, the plaintiff’s ex-boyfriend filed suit against the plaintiff and served defendant with a subpoena requesting patient’s medical records. Defendant responded to the subpoena by filing the plaintiff’s medical record with the court, but did not notify the plaintiff. The plaintiff alleged that, as a result of this disclosure, she suffered harassment and extortion from her ex-boyfriend. The trial court initially ruled for the defendants, stating that HIPAA preempted any state statutory or common law claims related to HIPAA violations.

While acknowledging that it was “well settled” law that HIPAA creates no private right of action, the Connecticut Supreme Court reversed the trial court’s decision, noting that the plaintiff was not asserting a statutory right or a private right of action under HIPAA, but rather was making a common-law negligence claim with HIPAA informing the standard of care. The court, in reviewing HIPAA’s preemption provisions, which apply to “contrary” provisions of state law and exempt “more stringent” state laws, concluded that HIPAA did not preempt a state common law theory of negligence. the court found that HIPAA was appropriately used to inform the standard of care applicable to such a negligence theory on the basis that HIPAA now sets standards for health information privacy and confidentiality among health care providers,. The court was able to identify multiple decisions in both federal and state courts throughout the country which came to similar conclusions regarding HIPAA’s failure to preempt common law claims of negligence.

This is an important decision that reflects how HIPAA non-compliance or breach can be used to establish claims of negligence based on breach of applicable standards of care extending to not only “covered entities” such as health care providers, insurers or clearinghouses, but also those organizations that do business with Covered Entities as Business Associates. Based on the Connecticut decision and other similar cases throughout the country, there is a likelihood we will see an increased number of claims using state common law negligence actions based on unauthorized release or disclosure of the plaintiff’s protected health information, or even an inadvertent breach, if appropriate physical and technological safeguards were not in place as required by federal and state privacy laws.

The case is Emily Byrne v. Avery Center for Obstetrics and Gynecology, P.C. (SC 18904).

In what is at heart a trade secret misappropriation case, some Patent Law periodically materializes, like the smile of the Cheshire Cat.

This concept was evidenced by a recent case out of Texas.  Bianco, M.D. v. Globus Medical, Inc., 2:12 CV 147 (E.D. TX 10/27/14).

Dr. Bianco had an idea for a continuously adjustable spinal implant, which would fit between two adjacent vertebrae in the spine that had become compressed.  Adjust the mechanism, and the vertebrae move apart. The prior art, to use a patent term, revealed mechanisms  which would do the same, but were not continuously adjustable—they worked at best in increments, and could not be reversed (once you separated, that was that; no going back).

Dr. Bianco approached Globus with his idea, which apparently was not much more than some drawings and related general text, for a specific embodiment in the form of a scissor mechanism for performing the adjustability (think of a car jack).

According to the Court, Globus and the good Dr. entered into a written NDA (which apparently disappeared in the records, ultimately taking along with it a count for breach of written contract—the contract not materializing at trial).  Globus had him submit a “new Idea Submission Form” with his proposal. Over the next two and a half years, Dr. Bianco inquired of Globus on multiple occasions about the Bianco device and Globus’ decision. Sometime in later 2009-early 2010, Globus then told Dr. Bianco that it is “not interested in his technology.”

Wait for it—one year later, according to the Court, Globus began marketing a continuously adjustable spinal implant. How did Dr. Bianco learn this? A Globus sales representative tried to interest him in the “new” product. (Practice Point 1: Don’t try to sell an idea submitter his product development submitted to the company).  Dr. Bianco, obviously now “upset,” confronted his Globus liason with this news, who responds according to the record that “he understood that [Bianco] had intellectual property in this implant and that the company would make it right.”  (Practice Point 2: Whoa.)

With that as preamble, the case is of some note because of what we see develop out of Texas  trade secret law (which is not atypical here), and the interplay of Patent Law in the process. The case ultimately turned upon not a written contract, but the confidentiality associated with the disclosure and relationship established between the parties surrounding the “idea.” Evidence showed that what Globus actually developed and commercialized was not a “scissor mechanism,” but something else (called a “ramp”).  But Dr. Bianco pitched that his confidential disclosure was broader than just his “scissor” embodiment, and that it was his ideas tht promted Globus to pursue the continuously expandable and reversible implant. This “spurred” Globus engineers to the “ramp” concept. (Practice Point 3: Don’t have a sketch of  what would be the Globus commercial concept literally drawn by your engineer on the back of Dr. Bianco’s submission papers—I couldn’t make this up).

The Court does some dancing with the law on the protectability of an “idea” per se, stating axiomatically that “ideas” of course are not protectable under any intellectual property concepts, except, of course, if you keep that idea secret and protect it from discovery by improper means. One can agree to that protection by contract, implied or otherwise, or in “an informal fiduciary relationship.”   Here, the Court (in the context of evidence presented to the jury), reviewed how the parties did indeed proceed on the basis that the basic “idea” for a continuously adjustable spinal implant may have been conveyed, and then used to if nothing else, “spur” the Globus development.

Patent Law permeates the case where the Globus attempted to try to parse out details of the commercial product from the “idea” conveyed by the plaintiff—“we didn’t use certain features, therefore we didn’t use the trade secret.” The Court noted that for liability, you don’t have to use everything, as in a patent claim: “”[u]se does not require that a party use another’s trade secret in the form in which it received it.”

Patent Law then again materialized in damages. Dr. Bianco was awarded a royalty, both as to past and then going forward, but no injunction. This is very much a result of current Federal Circuit jurisprudence (our national Patent Appeals Court). Dr. Bianco wanted a disgorgement of profits, but the jury, and then post-hac the Judge, concluded that a reasonable royalty was really the measure of damages, largely based upon industry comparative licenses for use of developments by doctors in similar circumstances.

On Tuesday, December 2, 2014 at 12:00 p.m. Central, in the final installment of our 2014 Trade Secrets Webinar Series, Seyfarth attorneys Michael Baniak, Joseph Lanser and Randy Bruchmiller will focus on considerations involving protecting trade secrets and intellectual property in business transactions, including, mergers and acquisitions, joint ventures and other collaborative arrangements.

Summary of topics:

  • How to properly address developments by independent contractors hired to “invent” or develop
  • IP due diligence in mergers and acquisitions
  • Effectively integrating and binding key employees with access to confidential information in business transactions
  • IP rights in the lifecycle of a joint venture

There is no cost to attend this program, however, registration is required.

If you have any questions, please contact events@seyfarth.com.

CLE: CLE Credit for this webinar has been awarded in the following states: CA, IL and NY. CLE Credit is pending for the following states: GA, NJ, TX and VA. Please note that in order to receive full credit for attending this webinar, the registrant must be present for the entire session.

 

Seyfarth Intellectual Property, Trade Secret and Privacy attorneys are participating in the 39th Annual Intellectual Property Institute Conference in Garden Grove, California this week.

The IP Institute brings together preeminent speakers from leading companies and law firms to share tips “from the trenches.” The Institute covers a great array of topics affecting our clients, such as trademarks, copyrights, licensing, litigation, entertainment law, right of publicity, trade secrets, sweepstakes, social media, ADR, privacy, and technology law, as well as a separate patent law track.

Los Angeles Partner Robert B. Milligan will be moderating a panel on “Cybersecurity and Protecting Valuable Trade Secrets and Confidential Information While Balancing Innovation and Employee Mobility,” and Sacramento Partner James D. McNairy will be presenting “Hot Topics in California Trade Secrets Law,” on Thursday, November 6, 2014.

Seyfarth will have a staffed table at the event, Seyfarth attorneys Yandi Fashu-Kanu, Alan M. Lenkin, James D. McNairy, Robert B. Milligan, Puya Partow-Navid, Joshua Salinas, Eugene Suh and Kenneth L. Wilton are scheduled to attend and participate.

For more information, please click here

We are pleased to announce the webinar “How and Why California is Different When it Comes to Trade Secrets and Non-Competes” is now available as a podcast and webinar recording.

In Seyfarth’s eighth installment of its 2014 Trade Secrets Webinar series, Seyfarth attorneys focused on recent legal developments in California trade secret and non-compete law and how it is similar to and diverse from other jurisdictions, which included: a discussion of the California Uniform Trade Secrets Act, trade secret identification requirements, remedies, and the interplay between trade secret law and Business and Professions Code Section 16600, which codifies California’s general prohibition of employee non-compete agreements. The panel discussed how these latest developments impact litigation and deals involving California companies.

As a conclusion to this well-received webinar, we compiled a list of key takeaway points, which are listed below.

  • While California has rejected the inevitable disclosure doctrine, threatened misappropriation can be a viable theory for relief when there is evidence of data theft and intent to use company data.
  • California’s recent appellate decision in Altavion, Inc. v. Konica Minolta Sys. Laboratory, Inc., 226 Cal. App. 4th 26 (2014)  has broadened the scope of trade secret protectable information to include ideas.
  • Federal district courts in California have increasingly elected to enforce forum selection clauses in noncompete agreements of California employees and found that enforcement of such clauses does not violate California’s strong public policy of employee mobility. See, e.g., Hegwer v. American Hearing and Associates, 2012 WL 629145 (N.D. Cal., Feb. 27, 2012) (granting motion to dismiss California action based upon Pennsylvania forum selection law clause – alleged illegality of non-compete irrelevant to enforcement of forum selection clause); Hartstein v. Rembrandt IP Solutions, 2012 WL 3075084 (N.D. Cal., July 30, 2012) (court agrees to enforce Pennsylvania forum selection clause, disregarding ultimate affect that Pennsylvania court will enforce improper non-compete clause against California citizen).
  • The recent decision in Cellular Accessories For Less, Inc. v. Trinitas LLC, No. CV 12–06736 D, DP (SHx), 2014 WL 4627090 (C.D. Cal. Sept. 16, 2014) illustrates that LinkedIn contacts and other social media connections could be protectable as trade secrets If the methods used to compile the contact information are “sophisticated,” “difficult,” or “particularly time consuming.” Nonetheless, the purported trade secret holder will also have to establish that the contacts were not made public.

Our next and final webinar of our series will take place in December. Seyfarth attorneys will have a high-level discussion on protecting trade secrets and intellectual property in business transactions. Details to come at www.seyfarth.com/seyfarth-events

 

Way back in the 1980’s, there was a very simple way to keep computer information from being stolen. Every disk containing confidential information was locked in a Sargent and Greenleaf safe. 

Of course, even then, there were problems: 22,000 or so 3.5 inch “microfloppy” disks hold the same amount of data as a 32 GB thumb drive can hold today. The safe got a bit full, and it was difficult to find your disk in that haystack.

Now there is the internet, and tablets that are fully-functioning computers, and cellular telephones the size of…tablets. Cell phones can take pictures, record conversations, and send data anywhere in the world.

For example, Stephen Ward of Owensboro, Kentucky sold a digital copy of a confidential manual for the RQ-21A Blackjack drone aircraft to an FBI undercover agent. For more on Mr. Ward’s conviction, see the Yakima Herald article. Of course, some people just give electronic copies of government secrets away, like Edward Snowden and Bradley Manning.

The insider threat to data security, also called “cybersecurity” is no longer somebody else’s problem, nor merely an information technology (IT) problem.  Cyber crimes are everyone’s problem.  And everyone at your company needs to be part of the solution.

This does not mean that everyone must be subjected to lie detector tests or threatened with waterboarding if they accidentally lose their cell phone.  It does mean that everyone must use a little common sense about their use of company resources, and it also means the company should have reasonable IT safeguards.

Many people use workplace-provided laptop computers to do their jobs from somewhere other than the office. That alone isn’t a problem, but having open access to sensitive corporate data via the coffee house wi-fi, or allowing wireless access to proprietary data, might be. Some employees absolutely must have the latest and greatest devices to be more productive. These next-generation devices may also have…the ability to access confidential data without leaving a trace. Then there are personnel that just leave devices lying around unattended.  All of these situations must be addressed.

Because not all data is proprietary, a good place to start is determining what data needs protection.  For example, if your company stores or works with Protected Health Information (PHI), that data probably needs to be secured. Although this step may seem somewhat obvious, in July 2013, four million people had their PHI and social security numbers compromised, and another breach in 2011 affected 4.9 million people.

Once the confidential data is identified, secured storage for that data may be appropriate.  Separate storage that is only accessible by certain employees, or other limitations on access may provide your proprietary data with additional protection. To ensure your secrets remain secret, you may want to do what the CIA and NSA do: encrypt your data. 

No matter how safe the computer systems are, if you have inexperienced or untrained personnel, you have a big hole in your security system. Training your employees how to maintain data security on an ongoing basis should help maintain their awareness that the data is important and needs to be protected.  Update your security training and your security system if new projects or data needs additional protection. 

When you disseminate proprietary information, just because the data is no longer in your control doesn’t mean you shouldn’t take steps to protect it. Secure all data, and record the dissemination that is outside of normal avenues of access. 

In other words, have a cybersecurity program that fits your business. Keep your employees aware of how to maintain security of the data in your systems. And every now and then, make sure that your confidential data cannot be retrieved by a teenager using their newest cell phone.

Or you can go back to the floppy disks and a safe. Kind of difficult to drag that into a business meeting, though.

Several ex-employees now may compete with their former employer, and may solicit its employees and customers, after a federal judge in the Eastern District of Washington held that the restrictive provisions in their employment agreements are unenforceable. 

The agreements, drafted by the former employer, contained a choice-of-law provision which the former employer tried unsuccessfully to invalidate.  The court also held that a low-level at-will employee’s non-compete covenant lacked sufficient consideration to be enforceable where all he received for signing it was a job offer.  Genex Cooperative, Inc. v. Contreras, Case No. 2:13-cv-03008-SAB (Oct. 3, 2014) (Bastian, J.).

Summary of the Case

Genex was in the business of, among other activities, inseminating dairy cows and marketing bovine semen.  Four of its employees resigned and the next day began servicing its customers on behalf of its competitor.  Genex filed a complaint against all four, seeking in part to enforce non-competition covenants signed by three of the four defendants and non-solicitation covenants signed by two of the four.  The court invalidated all of the covenants on the ground that they were unnecessary in order to provide reasonable protection to Genex or were otherwise contrary to applicable law.  

Choice of Law Provision in Defendant Verduzco’s Agreement.

The employment agreement signed by Verduzco stated that it was governed by Wisconsin law (Genex is incorporated there).   Although the provision was drafted by Genex, the company argued that the court should apply the law of the forum, Washington, for three reasons: (a) Verduzco worked there both for Genex and, subsequently, for its competitor, (b) he signed the agreement there, and (c) Wisconsin law violated “a fundamental policy” of Washington because its judges have the power to blue pencil otherwise unenforceable contracts whereas Wisconsin jurists are not permitted to do so.  Judge Bastian held that judicial discretion to blue-pencil is a “general rule of contract law” in Washington, not “a fundamental policy.”  Therefore, the agreement’s designation of Wisconsin law is enforceable. 

Covenants Not to Do Business with Genex Customers.

Defendant Contreras’ non-compete agreement prohibited him, for one year after termination, from doing business with any Genex customer with whom he had had contact during the 18 months prior to his leaving Genex.  Judge Bastion held that Genex failed “to meet its burden to establish reasonableness of the covenant.”  He noted that “Contreras — who cannot read or write in English — was a low-level agricultural worker with an at-will employment relationship with Genex.”  The question of “Whether non-compete agreements can ever be enforceable against at-will employees, without providing specific consideration such as a promise for future employment or training, is an open question in Washington.”  However, both nationwide and in Washington, a covenant with “an at-will employee who did not have unique or professional skills” is unlikely to be deemed reasonable. 

Verduzco’s covenant prohibited post-termination solicitation of anyone from whom he had sought new or increased business in the last 18 months of his Genex employment.  The court observed that this prohibition forbad him from soliciting prospects who placed no orders with him during those 18 months, and that such a covenant is unenforceable under the law applicable to his agreement, that of Wisconsin.

Defendant Senn’s agreement restricted him, for 18 months after termination, from engaging “in either the artificial insemination of cattle or the sale of semen in the area in which [he] has been employed [by Genex] and rendered service.”  Because, once again, even local dairy farms not previously serviced by Genex were out of bounds, the court held that the covenant was not “necessary for the protection of Genex’s business or goodwill.”

Covenants Not to Solicit Genex’s Employees.

The non-solicitation clause in Verduzco’s employment agreement directed him not “to induce or attempt to induce” any Genex employee to terminate his or her employment with Genex.  Judge Bastian stated that under Wisconsin law a “no-hire” prohibition like that is invalid because it constitutes “a ‘harsh and oppressive’ restriction on the rights of an employee.”

Contreras’ agreement committed him not to “directly or indirectly encourage any Genex employee to terminate his/her employment with Genex.”  The company admitted that this provision was intended to prohibit him from seeking to “inspire” employees to leave Genex’s employ.  The court held this restriction was unenforceable, especially since his “decision to terminate his at-will employment may have inspired the other defendants with the courage to quit as well.”  Emphasis added.

Takeaways

The Genex opinion deals with and resolves a variety of issues.  It teaches that the draftsperson of a rational choice of law provision in an employment agreement has an uphill battle trying to avoid it.  Further, the opinion tells us that employers should be wary of trying to enforce covenants signed by low-level employees or those without separate, meaningful consideration.  Finally, restrictive employment covenants are less likely to be enforced if they are intended to expand the prohibitions beyond those necessary to provide the former employer with reasonable protection. 

Who Should Attend:  In-house counsel, IT professionals, HR professionals, Privacy professionals, corporate executives, risk managers, and directors.

When & Where: This program will be held at three different locations.

November 13th at Seyfarth Shaw’s San Francisco Office (lunch and registration will begin at 11:30 a.m., program will begin at noon and go until 1:30 p.m.).

November 18th at Seyfarth Shaw’s Los Angeles – Century City Office (lunch and registration will begin at 11:30 a.m., program will begin at noon and go until 1:30 p.m.).

December 3rd at the Westin Palo Alto in Palo Alto (breakfast and registration will begin at 8:30 a.m., program will begin at 9:00 a.m. and go until 1:30 p.m.).

In today’s highly mobile and competitive world, employees frequently move between companies within the same industry.  Rarely a day goes by without a news report of another high-profile theft of important data from a company, or the loss of key employees to competitors.

Employee mobility, coupled with the digitalization of company assets, has increased the need for creative and thoughtful protections of valuable company data.  It has become extremely easy for employees, especially disgruntled or irresponsible ones, to take and disseminate confidential information to the detriment of their current and former employers.  The need to protect company trade secrets and other confidential data against departing employees and to follow best practices when hiring a competitor’s employees has never been greater.

Seyfarth attorneys Robert Milligan and Jim McNairy will be joined by Jim Vaughn of iDiscovery Solutions, Kathleen Deibert of Intel, and Joshua Kagan of PCH International, to present a lively discussion that focuses on:

Best practices when hiring new employees: 

  • Proper employee onboarding — a cradle to grave approach
  • Employing effective non-disclosure and invention assignment agreements and computer access and bring your own device policies

Best practices for protecting your company when employees depart:

  • Proper exit interview techniques and certifications
  • Reducing risk of disclosure of trade secrets in social media and via online repositories and other electronic means
  • Identifying the unauthorized taking/disclosure of trade secrets through the use of digital forensics

Discussion of recent cases/legislation:

  • The current circuit split on the Computer Fraud and Abuse Act
  • Trade secret preemption
  • Forum selection/choice of law clauses

High level strategies for addressing California’s prohibition on non-compete agreements

Registration: Attendance is limited to enable attendee participation so please RSVP as soon as possible. There is no cost to attend, but registration is required and seating is limited. This program is designed for company representatives and not outside counsel.

For questions, please contact Seyfarth Events at events@seyfarth.com and reference this program.

An employee executed an employment agreement which included a two-year covenant not to solicit the employer’s customers.  When the employer sold the company’s assets, the sale included that agreement.  The employee then went to work for the assets purchaser but subsequently resigned.  The Texas Appellate Court held that the two-year period began to run on the date the assets seller ceased to be the signer’s employer.  Lasser v. Amistco Separation Products, Inc., No. 01-14-00432-CV (Tex. App. Court, Oct. 2, 2014).

Summary of the Case

The employment agreement between Lasser and the assets seller, ACS, included a confidentiality provision as well as the non-solicitation covenant.  Lasser worked for the assets purchaser, Amistco, for 15 months and then resigned, accepting a job with its alleged competitor.  Amistco sued and sought a preliminary injunction.  The trial court’s first injunction order was dissolved by the Texas Court of Appeals because of a lack of specificity.  After the lower court issued a more detailed order, the appellate tribunal affirmed as to confidentiality but dissolved the non-solicitation injunction, holding that the covenant expired two years after Lasser left ACS’ employ. 

Chronology

Lasser’s employment with ACS terminated on February 29, 2012.  He went to work for Amistco the next day and remained employed by that company until June 1, 2013.  He immediately went to work for Woven Metal Products which assigned him to head a new division that allegedly competed with Amistco. 

Amistco’s lawsuit and first injunction motion

Amistco promptly sued Lasser, claiming that he was about to violate the confidentiality provision and non-solicitation covenant in his ACS employment agreement.  Amistco moved for entry of a preliminary injunction against Lasser’s (a) solicitation of Amistco’s customers, and (b) use of Amistco’s trade secrets and confidential information.  The trial court entered the injunction, and Lasser appealed. 

Two Appeals

Early in 2014, the appellate court reversed the injunction order on the ground that it was insufficiently specific (Lasser I).  Amistco then moved for entry of a more detailed preliminary injunction which the trial court entered.  Lasser appealed again.  Last week, the appellate court affirmed the injunction order insofar as it related to confidentiality but reversed the remainder of the order, holding that the non-solicitation clause lapsed on March 1, 2014 (Lasser II).

The holdings in Lasser II.  

(a) The holding regarding the non-solicitation clause.  The appeals court held that Lasser covenanted with ACS not to solicit its customers for two years after termination of his employment.  By the time Lasser II was decided in October 2014, the non-solicitation prohibition had expired and no longer was enforceable.

(b) The holding regarding the confidentiality clause.  After Lasser left Amistco, that company retained a computer forensics expert to analyze Lasser’s company computer to determine whether he had downloaded any of Amistco’s trade secrets.  The expert concluded that Lasser had taken with him more than 1000 confidential Amistco files.  On appeal, Lasser denied that the files contained secret data.  He also challenged the second injunction as insufficiently specific. 

The first injunction restrained Lasser simply from “using, . . . [or] directly or indirectly disclosing, copying or otherwise reproducing, or giving others access to any of [Amisco’s] confidential information and trade secrets.”  Commenting in Lasser I that “the order neither defines nor in any manner indicates from its context the meaning of the phrase ‘confidential information,’” the Court of Appeals held that the injunction was “not sufficiently clear to provide Lasser with adequate notice of what acts he is compelled to complete and what conduct he is restrained from performing.  In other words, he is left to speculate what conduct might satisfy or violate the order.  This is impermissible.”

The trial court’s second injunction identified two dozen categories of “confidential information and trade secrets” that were the subject of the order.  In Lasser II, the Court of Appeals held that “The specific examples of the items comprising ‘trade secrets’ and ‘confidential information,’ when read in the context of the suit, provided Lasser with adequate notice of the information that he is prohibited from using or disclosing.”

Takeaways

Assignment of Lasser’s employment agreement provided Amistco (a) a cause of action to prevent his disclosure of confidential information, but (b) no defense against his post-termination solicitation of Amistco’s customers.  In order to protect against such soliciting, apparently, Amistco would have had to obtain its own covenant from Lasser.

By Ada W. Dolph, Robert T. Syzba and Jade Wallace

In an effort to preempt another “Bridgegate” scandal, New Jersey State Senator Loretta Weinberg has sponsored a bill to extend whistleblower protection to employees who disclose incidents of wasted public funds, governmental abuse, or gross mismanagement. On October 9, 2014, the New Jersey Senate’s Labor Committee approved Bill S-768, which, if passed, will significantly expand New Jersey’s Conscientious Employee Protection Act (“CEPA”).

Last year, in a scandal dubbed “Bridgegate” by the media, Governor Chris Christie and his administration were accused of ordering a number of lane closures on the George Washington Bridge. The lane closures caused massive traffic jams that gridlocked Fort Lee, New Jersey (home of the New Jersey side of the bridge) during the morning rush-hour on Monday, September 9, 2013, which was Fort Lee’s first day of school. Christie’s administration was accused of retaliation against the Mayor of Fort Lee, Mark Sokolich, for not supporting Christie in New Jersey’s 2013 gubernatorial election. As co-chair of the Legislative Select Committee on Investigation and a representative of Bergen County (home of Fort Lee), Senator Weinberg was a natural choice to propose legislation intended to preclude another “Bridgegate.”

The proposed bill would expand CEPA, New Jersey’s whistleblower protection statute. CEPA currently protects employees against employer retaliation when they disclose, testify, or refuse to participate in actions by their employer that are criminal or fraudulent, or that risk public safety and health. S-768 broadens employee safeguards by adding protection for employees who report waste of public funds or abuse or gross mismanagement of government authority. The bill defines “abuse of authority” as “a pattern of illegal, malicious, fraudulent, arbitrary or capricious actions” by a government employer “in a manner clearly deviating from the standard of care or competence that a reasonable person would observe in the same situation.” “Gross mismanagement” is defined as requiring negligence or incompetence that has a “substantial adverse affect on the operations, clients, customers or employees” of the government agency.

Passed by the committee with a 3-1 vote, the bill now moves forward to the full Senate for consideration. Although the proposed bill’s direct impact is limited to public employers, quasi-public and private employers should nevertheless be mindful of these efforts to expand CEPA, which pattern efforts across the country to increase protections for whistleblowers, especially in connection with drafting and enforcing non-disclosure obligations.