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People Aspects of EntrepreneursPeople Aspects of EntrepreneursPeople Aspects of EntrepreneursPeople Aspects of Entrepreneurs

Benjamin W. JeffersBenjamin W. Jeffers

Challenges In A World Of Employee MobilityChallenges In A World Of Employee Mobility

Immigration issues impacting ability to hire personnel with specialized knowledge

Protecting a venture’s trade secrets when employees leave

Executive compensation

Immigration – The H-IB Visa Shortage ExampleImmigration – The H-IB Visa Shortage Example

U.S. businesses use H-1B visa for foreign workers in specialty occupations:• Theoretical and practical application

of highly specialized knowledge; and • At least a B.A. degree in the specific

specialty• Mainstay where other visas do not

apply (e.g., TN or L-1A intracompany transferee of manager or executive)

Annual limit (“cap”) of 65,000 new H-1B visas for B.A. applicants, plus 20,000 who have a U.S. Master’s degree or above

Immigration – The H-IB VisaImmigration – The H-IB Visa

May file petitions starting April 1st for next fiscal year (Oct. 1 – Sept. 30).

The “rush” to file:• Date this year was April 2, 2007• The U.S. Citizenship and

Immigration Services (USCIS) announced that the cap had been reached the same day

Immigration – The H-IB VisaImmigration – The H-IB Visa

•Over 130,000 H-1B petitions

•Cap reached on first day of filing

•Random selection process to determine which cases will be accepted

•Everyone else must wait another year

Immigration – The H-IB VisaImmigration – The H-IB Visa

“[T]he terrible shortfall in our visa supply for the highly

skilled stems not from security concerns, but from visa

policies that have not been updated in over a decade and

a half.”

“I personally witness the ill effects of these policies on an

almost daily basis at Microsoft.”

“We are essentially asking top talent to leave the U.S.”

William H. Gates, before the Senate Comm. on Health, Educ., Labor and

Pensions, March 7, 2007

Immigration – The H-IB VisaImmigration – The H-IB Visa Potential Reform:

• Security Through Regularized Immigration and a Vibrant Economy (“STRIVE”) Act of 2007 (H.R. 1645), introduced March 22, 2007

– Raise cap from 65,000 to 115,000, with potential increases to 180,000

– Eliminate 20,000 cap for persons with advanced degrees from U.S. universities

Other potential reforms:• Backlog of green card applications• Interview requirement for visa applicants• Discretion of USCIS officers

Company Secrets: Why Is This An Issue? Company Secrets: Why Is This An Issue?

Increasingly mobile workforce

The reality of the digital workforce

Be careful when hiring

Company Secrets: Multiple Layers of ProtectionCompany Secrets: Multiple Layers of Protection

Covenants Not to Compete

Confidentiality Agreements

Nonsolicitation Agreements

Statutory Protection• Uniform Trade Secrets Act • Economic Espionage Act of 1996 • Computer Fraud and Abuse Act

Company Secrets: Who Should Be Subject To Restrictive Covenants?

Company Secrets: Who Should Be Subject To Restrictive Covenants?

Other shareholders

Key employees

Sales Representatives/Distributors

Suppliers

Not the janitor

Company Secrets:Restrictive CovenantsCompany Secrets:Restrictive Covenants

Generally are enforceable, but:• Must protect a reasonable

competitive interest• Must be reasonable as to:

– Duration– Geography– Scope/type of business

• Not a general restraint on trade

One-size does not fit all

Need consideration

Company Secrets:Take Care When HiringCompany Secrets:Take Care When Hiring Uniform Trade Secrets Act adopted in

nearly all states

What Is A Trade Secret? • Trade secret is information, including a

formula, pattern, compilation, program, device, method, technique or process that both:

– Derives independent economic value, actual or potential, from not being known or ascertainable by proper means by others who could gain value from it; and

– Is subject to reasonable efforts to maintain its secrecy

Company Secrets:Take Care When HiringCompany Secrets:Take Care When Hiring

Economic Espionage Act of 1996

Criminal violation to steal trade secrets

Company Secrets:Take Care When HiringCompany Secrets:Take Care When Hiring Computer Fraud and Abuse Act

Unauthorized access to computer information• Plaintiff fraudulently or intentionally

accessed a protected computer without authorization, and

• Caused damages of at least 5K• Not limited to “trade secrets”

Can bring action in federal court

Arguably lower pleading standard than UTSA

Executive Compensation - TrendsExecutive Compensation - Trends

Sarbanes-Oxley disclosure and accountability

Enron – deferred compensation and timing

SEC proxy rules – disclosure of perks

Accounting rules

Addition of Section 409A as part of the American Jobs Creation Act of 2004