Authored by Manny Schoenhuber
Welcome back to the third edition of USA Business Digest – A Legal Newsletter for European Companies and Investors in the United States. This month, we will take a closer look at (1) an Executive Order signed by President Biden implementing the EU-US data privacy framework and (2) potential implications a federal noncompete law could have on your business. As always, this update is available in both English and German.
DATA PRIVACY LAW
President Biden Signs Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities
On October 7th, President Biden signed an Executive Order on Enhancing Safeguards for United States Signals Intelligence Activities directing the steps that the U.S. will take to implement its commitments under the EU-US Data Privacy Framework (EU-US DPF), which President Biden and European Commission President von der Leyen announced in March 2022.
Businesses like yours, both in the U.S. and Europe, rely upon cross-border data flows to participate in the digital economy and to expand economic opportunities. The common goal of the EU-US DPF is to restore trust and stability to transatlantic data flows after the Court of Justice of the European Union struck down the prior EU-US Privacy Shield framework.
The Executive Order:
- Adds further safeguards for U.S. signals intelligence activities so that such activities must follow defined national security objectives, observe the privacy and civil liberties of all persons, and advance validated intelligence priorities in a manner that is proportionate to those priorities;
- Mandates handling requirements for personal information and extends the responsibilities of officials to ensure proper remediation of non-compliance;
- Requires U.S. Intelligence Community elements to update policies and procedures;
- Creates a multi-layer mechanism for individuals from qualifying states and regional economic integration organizations to obtain independent and binding review and redress of claims that personal information collected through U.S. intelligence was collected or handled by the U.S. in violation of applicable law; and
- Calls on the Privacy and Civil Liberties Oversight Board to review Intelligence Community policies and procedures to ensure that they are consistent with the Executive Order and to conduct an annual review of the redress process.
This new framework will not only afford the European Commission a basis to adopt a new adequacy determination, but also provide greater legal certainty for businesses like yours to safely and securely transfer EU personal data to the U.S.
EMPLOYMENT LAW: NONCOMPETES
Proposed Restoring Workers Rights Act to Establish Federal Regimen for Protection of Companies’ Trade Secrets While Also Enabling Workers to Change Jobs More Easily
The Restoring Workers Rights Act is a bill introduced to create federal legislation on noncompete agreements with the stated goal of bringing uniformity and certainty to an area of employment law that currently still varies from state to state. For example, California already barred almost all noncompetes, Oklahoma and North Dakota strictly limited them to a very narrow set of circumstances, and Texas now requires valid consideration in combination with reasonable limits on time, geographic scope, and covered activities.
If the bill passes, it would prohibit noncompetes for all nonexempt workers nationwide by establishing statutory income minimums that must be met before employees can be subjected to post-employment restrictive covenants. Notably, the bill, as currently drafted, is retroactive as to hourly workers, meaning that it would nullify restrictive agreements entered into prior to the law’s effective date and with the parties’ full consent. Although the focus is clearly on employee mobility, the bill also seeks to protect companies’ trade secrets and other assets.
Especially if you are a business with multi-state operations, a uniform federal noncompete framework would provide more clarity and uniformity for your employment agreements. But it would most likely make it easier for hourly workers to pursue new opportunities without having to abide by more restrictive covenants. Of course, there is no guarantee that the bill will become law in its current form—or that it will pass at all—but you may want to take a proactive approach before a federal ban or restriction on noncompetes is put into place. One thing, however, is for sure: it is safe to say that restrictive covenants impacting employee mobility will continue to be heavily scrutinized. ♦
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