Trade Secrets & Employee Mobility

The fight to resurrect the FTC’s Final Rule (the “Final Rule”) banning noncompetes continues in the U.S. Court of Appeals for the Fifth Circuit. In August 2024, mere days before the Final Rule was to take effect, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a memorandum opinion and order granting the plaintiffs’ motion for summary judgment which set aside the Final Rule, ruling that the ban exceeded the FTC’s congressional authority by engaging in substantive rulemaking and that, even if permitted, such rulemaking was arbitrary and capricious.

On October 24, 2024, the FTC appealed Judge Brown’s ruling to the Fifth Circuit, Case No. 24-10951, arguing that Judge Brown erred in three regards: (1) she misapplied principles of statutory construction in ruling that the FTC exceeded its statutory authority to issue substantive rulemaking surrounding unfair competition; (2) she erroneously concluded that the Final Rule was arbitrary and capricious; and (3) her order universally vacating the Final Rule was impermissibly overbroad. The FTC describes these “errors” as errors of law which are subject to de novo review by the Fifth Circuit. Neither appellee contested the standard of review. 

Thomson Reuters Practical Law has released the 2025 update to “Trade Secrets Litigation,” co-authored by Peter A. Steinmeyer.

The Note discusses trade secrets litigation for employers whose employees or former employees have misappropriated trade secrets. This Note describes pre-litigation investigations, sending cease and desist letters, and contacting law enforcement. It also addresses filing a legal action, including forum selection and choice of law issues, deciding whether to include the employee’s new employer and third parties, common causes of action (including misappropriation under the Defend Trade Secrets Act (DTSA)), discovery, injunctive relief, damages, and attorneys’ fees. It includes best practices for preparing to counter potential defenses and counterclaims and maintaining confidentiality during litigation. This Note applies to private employers and is jurisdiction-neutral.

Consistent with our previous reporting that states would continue to address noncompete issues even after the apparent end of the FTC Noncompete Rule, Ohio has joined the growing list of jurisdictions seeking to restrict the use of noncompetes.  On February 5, 2025, Ohio state Senators Louis W. Blessing (R) and William P. DeMora (D) introduced Senate Bill (SB) 11 (the “Bill”), that, if enacted, would prohibit employers from entering into a noncompete agreement with a “worker” or “prospective worker”. 

The Bill defines “worker” as “an individual who provides services for an employer[,]” including, among others, employees, independent contractors, externs, interns, and volunteers.  The Bill does not define “prospective worker.”

If enacted as introduced, the Bill would prohibit employers from enforcing agreements that prohibit or penalize workers from seeking or accepting work with a person, or operating a business, after the conclusion of the relationship between the employer and worker, including any of the following:

On January 3, 2025, the Washington State Legislature introduced HB1155 (the “Bill”) that, if passed, would broaden the definition of a “noncompetition covenant” and prohibit all employer-employee noncompete agreements.  The Bill would also seek to clarify the definition of “non-solicitation agreement” under Washington law. On January 13, 2025, the Bill was referred to the House Labor & Workplace Standards Committee where it remains pending.

Washington’s statute restricting the use of noncompetition covenants took effect in 2020, and it was amended in important ways last year.  The current Bill proposes yet more amendments.

If passed, the Bill would amend Revised Code of Washington (RCW) Sections 49.62.005 and 49.62.010 to expand upon the definition of “noncompetition covenant” and notes that the provisions protecting employees and independent contractors must be construed liberally. Under the Bill, a “noncompetition covenant” includes:

Thomson Reuters Practical Law has released the 2025 update to “Preparing for Non-Compete Litigation,” co-authored by Peter A. Steinmeyer.

The Note describes the steps an employer can take to prepare to successfully litigate a non-compete action, the primary options for enforcing a non-compete agreement, and the strategic decisions involved with each option. It discusses gathering evidence, assessing the enforceability of a non-compete, considerations before initiating legal action, cease and desist letters, seeking declaratory judgments, damages, and injunctive relief, and potential remedies available under the Defend Trade Secrets Act (DTSA). This Note is jurisdiction neutral.

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists discuss how to navigate “group lift-outs,” in which one company hires multiple employees from another company at or about the same time:

Group lift-outs are among the most challenging circumstances to navigate in the trade secrets and non-compete space. While possible in virtually every industry, they have become increasingly common in industries such as financial services, insurance, technology, and even design and apparel.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer, A. Millie Warner, Alexander C.B. Barnard, and Haley Morrison explain the myriad of complications that can arise in these scenarios, ranging from trade secret and non-compete violations to work-related emotional and abandonment issues.

With the Federal Trade Commission’s Noncompete ban essentially dead, state legislatures, as expected, are taking restrictive covenant lawmaking into their own hands. We previously reported that in 2023, while the FTC Noncompete ban was pending, New York Governor Kathy Hochul vetoed a bill that sought to ban all noncompetes in the State of New York, stating that a “balance” was needed instead of a strict ban on all noncompetes. On January 9, 2025, the New York State Assembly introduced NY A01361 (the “Bill”) to the Assembly Labor Committee that, if passed, would allow “employers to request or require a prospective or current employee to execute a restrictive covenant not to engage in specified acts in competition with the employer after termination of the employment relationship as a condition of employment, continued employment, or with respect to severance pay,” but only subject to certain requirements (discussed below).

The Bill would amend New York Labor Law to add Section 191-d: “Restrictive covenants.” Under this section, an Employee is defined as “any person employed for hire by an employer in any employment,” including “in a supervisory, managerial, or confidential position.” An Employer includes “any person, corporation, limited liability company, or association” as well as “the state[,] . . . political subdivisions, governmental agencies, public corporations, and charitable organizations.” The Bill also defines restrictive covenant as an agreement between an employee and an employer concerning existing or prospective employment, or an agreement between employee and employer with respect to severance pay.

The Bill outlines that for a restrictive covenant to be enforceable it must meet the following requirements:

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists look back on the top trade secrets and non-compete stories of the year:

This year has been a rollercoaster for trade secrets and non-compete law. We’ve seen major legal battles at both the federal and state levels impacting employers across the nation.

In this episode, Epstein Becker Green attorneys Peter A. Steinmeyer, Daniel R. Levy, Katherine G. Rigby, A. Millie Warner, and Erik W. Weibust recap 2024’s most significant updates, including the Federal Trade Commission’s non-compete ban, the National Labor Relations Board’s general counsel memo, state-level trends, and much more.

Over the course of the Biden administration, we have closely monitored parallel efforts by the Federal Trade Commission (FTC) and National Labor Relations Board (NLRB) to ban or limit the use of most non-compete agreements by employers. Now, in the wake of the recent presidential election, the future of these federal efforts is very much up in the air.

Predicting the incoming Trump administration’s position on non-compete bans is not straightforward. For one thing, the politics of non-competes is uncommonly non-partisan. The four states that generally ban non-competes include both very “blue” states (California and Minnesota) and very “red” states (North Dakota and Oklahoma). In addition, Trump advisors and appointees have conflicting views on the issue. On the one hand, former Florida congressman Matt Gaetz, a close advisor to Mr. Trump and his first pick for Attorney General, has previously publicized his support for the FTC’s non-compete ban. On the other hand, the Texas federal judge who blocked the FTC non-compete ban from taking effect nationwide was appointed by Mr. Trump during his first term.

Ultimately, the fate of FTC and NLRB efforts to ban non-competes will be in the hands of the individuals Mr. Trump picks to lead these agencies. Since winning the election, Mr. Trump has been setting records with the pace of his appointments to key posts but has not yet announced his nominees to lead the FTC and NLRB. Recent reporting, however, offers insight into some of the contenders for these posts as well as the likely fate of efforts by these agencies to ban non-competes once Mr. Trump takes office.

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists outline the benefits of intellectual property (IP) audits and trade secret assessments for employers and organizations looking to safeguard their assets:

With non-compete agreements facing continual legal pressure, what are some other ways employers can protect their trade secrets and IP?

In this episode of Spilling Secrets, Epstein Becker Green attorneys Daniel R. Levy, Gregory J. Krabacher, and Hemant Gupta describe how IP audits and trade secret assessments can offer a uniquely targeted approach to protecting sensitive information, ensuring a company has a grasp of the full scope of their assets.