Trade Secrets & Employee Mobility

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.

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists connect the enchantment of Harry Potter with the intricacies of trade secrets and restrictive covenants:

Prepare to be spellbound this Halloween as we cast a magical twist on the realm of trade secrets and restrictive covenants! Whether you're a Gryffindor at heart or more of a Slytherin, there's something for every magical mind seeking to safeguard their organization’s trade secrets.

Epstein Becker Green attorneys A. Millie Warner, Jill K. Bigler, and Aime Dempsey team up with Kristen O’Connor—Senior Assistant General Counsel, Employment at Marsh & McLennan Companies—to wave their legal wands over topics such as Professor Snape’s secret potion book, Hermione’s clever jinxes, and much more.

The United States Courts of Appeals for the Fifth and Eleventh Circuits will have their chance to weigh in on the FTC’s Noncompete Ban, which had been scheduled to go into effect on September 4, 2024, but was enjoined a couple of weeks before that date.

First, the Fifth Circuit.  The FTC Noncompete Ban was blocked on a nationwide basis on August 20, 2024, when the United States District Court for the Northern District of Texas issued a memorandum opinion and order in Ryan LLC v. Federal Trade Comm’n, Case No. 3:24-cv-00986-E, granting the plaintiff’s motion for summary judgment and setting aside the Ban.  On October 18, 2024, the FTC filed a Notice of Appeal of the opinion and order to the Fifth Circuit.  The FTC Noncompete Ban remains enjoined during the pendency of this appeal.

In addition to the Fifth Circuit appeal, the FTC is taking a second bite at the proverbial apple, in the Eleventh Circuit.  On August 15, 2024, in Properties of the Villages, Inc. v. Federal Trade Commission, Case No. 5:24-cv-316, the United States District Court for the Middle District of Florida granted the plaintiff’s motion for a preliminary injunction (although limited in scope only to the plaintiff), prohibiting the FTC from enforcing the Noncompete Ban.  This was similar to how the U.S. District Court in Texas had previously ruled, on Ryan LLC’s preliminary injunction motion.  On September 24, 2024, the FTC filed a Notice of Appeal of the Florida District Court’s preliminary injunction to the Eleventh Circuit.

National Labor Relations Board (“Board”) General Counsel Jennifer Abruzzo (“Abruzzo”) issued a General Counsel Memo (Memo GC 25-01) last week signaling that employers could face civil prosecution and significant monetary remedies for using non-compete and so-called “stay-or-pay” provisions in agreements with their employees.The new memo, issued on October 7, 2024, builds on Abruzzo’s earlier General Counsel Memo issued in May 2023, where, as we reported, she outlined her belief that nearly all post-employment non-competes violate employees’ rights under the National Labor Relations Act (the “Act”).

Since Abruzzo’s May 2023 memo, employers have witnessed a number of significant developments in this space, including the Federal Trade Commission’s (“FTC”) issuance of a rule in April 2024 banning the use of most non-competes and a subsequent decision by a Texas federal judge blocking that FTC rule. In June 2024, an NLRB Administrative Law Judge issued a ruling in a case involving an Indiana HVAC company finding that non-competes and non-solicitation clauses violate the Act, a decision currently being appealed to the Board.

In her October 7, 2024 memo, Abruzzo again urges the Board to find non-competes with all employees who are subject to the Act’s jurisdiction (nonmanagerial and nonsupervisory employees) to violate the Act except in a few limited circumstances, arguing that such provisions are frequently “self-enforcing” and deter employee mobility. She also advocates for “make whole” remedies where employers are found to have continued to maintain unlawful non-competes. Specifically, the memo argues that merely voiding such provisions is insufficient and that employees should be afforded the right to seek compensatory relief for the “ill effects” that flow from complying with “unlawful non-compete provisions.”

Last week, employers who use noncompetes got more good news with respect to the Federal Trade Commission’s proposed noncompete ban.

As readers of this blog are probably aware, back in August, the FTC’s noncompete ban was blocked when the United States District Court for the Northern District of Texas issued a memorandum opinion and order in Ryan LLC v. Federal Trade Comm’n, Case No. 3:24-cv-00986-E, granting the plaintiff’s motion for summary judgment and setting aside nationwide the FTC’s noncompete ban that was scheduled to go into effect on September 4, 2024.

Employers who use noncompetes may have breathed a sigh of relief with the Texas Court’s ruling, but a small doubt of uncertainty lingered.  Could another court reach the opposite decision and rule that the FTC noncompete ban may go into effect?

Two other federal lawsuits (one in Pennsylvania and one in Florida) challenging the FTC noncompete ban remained pending, and each had ruled upon a motion for a preliminary injunction regarding the FTC noncompete ban.  Like the Court in Texas, in Properties of the Villages, Inc. v. Federal Trade Commission, Case No. 5:24-cv-316 (M.D. Fla.), the Florida Court granted the plaintiff’s motion for a preliminary injunction (although limited in scope only to the plaintiff), and seemed likely to reach a final decision on the merits in line with the Texas Court. 

On September 12, 2024, the Regional Director of the National Labor Relations Board’s (“NLRB”) Region 22 in Newark, New Jersey, issued an unfair labor practice complaint against a New Jersey building services company, alleging that employee non-hire (or “no poach”) provisions in the company’s contracts with its building clients violate the National Labor Relations Act (the “Act”).

According to the NLRB’s news release, the complaint alleges that Planned Companies D/B/A Planned Building Services, which is a janitorial, building maintenance, and concierge services provider, “has maintained provisions in its contracts with its client buildings that interfere with, and are inherently destructive of, workers’ rights under Sections 8(a)(1) and (3) of the National Labor Relations Act.”  It further alleges that “Planned Companies restricts its client buildings from soliciting its employees to work for them in a similar job classification for a period of six months after the agreement is terminated, or from hiring employees after they leave Planned Companies’ employment. Any entity retained by the client building to replace Planned Companies is also bound by the hiring restriction.” 

A hearing before an NLRB Administrative Law Judge has been set for November 12, 2024.

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists delve into the implications for employers following the recent blockage of the Federal Trade Commission’s (FTC’s) non-compete ban.

On August 20, 2024, the U.S. District Court for the Northern District of Texas invalidated the FTC’s non-compete ban, deeming it arbitrary and capricious and beyond the scope of the agency’s statutory authority.

In this episode of Spilling Secrets, Epstein Becker Green attorneys Peter A. Steinmeyer, Erik W. Weibust, and Paul DeCamp tell us more about the court’s decision to block the ban, what legal challenges remain, and the key considerations for employers moving forward. 

Last summer, as discussed in this blog, the Georgia Court of Appeals issued a decision in N. Amer. Senior Benefits, LLC v. Wimmer that presented potential challenges for employers seeking to enforce employee non-solicitation provisions.  That case held, pursuant to Georgia’s Restrictive Covenants Act, OCGA § 13-8-50 et seq., that a restrictive covenant extending beyond the end of an individual’s employment, and undertaking to prohibit the individual from soliciting former coworkers, is unenforceable if it lacks an explicit geographic limitation. 

In a September 4, 2024 Opinion, the Georgia Supreme Court overruled that decision.  The relevant statutory provision in both cases is OCGA § 13-8-53(a), which permits enforcement of restrictive covenants “so long as such restrictions are reasonable in time, geographic area, and scope of prohibited activities.”  The Supreme Court held that “nothing in the text of subsection (a) mandates that a restrictive covenant contain an explicit geographic term, nor does subsection (a) prohibit a covenant’s geographic area from being expressed in implied terms.”

The Supreme Court continued: “In short, the plain text of subsection (a) requires with respect to geographic restrictions on competition that any such restriction be reasonable, regardless of whether the restriction is expressly stated or implied.”  The Court also noted that its reading of OCGA § 13-8-53(a) comports with the Restrictive Covenants Act’s “more permissive and flexible approach to restrictive covenants.”