Trade Secrets & Employee Mobility

After the nationwide injunction barring the Federal Trade Commission (FTC) Noncompete ban, we reported our anticipation that state legislatures would likely introduce legislation restricting the use of noncompetes. As expected New York, Washington, Virginia, Ohio, and Wyoming have all introduced—or enacted—legislation in 2025 aimed at limiting noncompetes and other restrictive covenants. On March 7, 2025, Texas joined this growing list of states when the Texas legislature introduced Texas House Bill 4067 (the “Bill”). If enacted, the Bill would amend Texas’s Business & Commerce Code by adding sections 15.501, 15.502, and 15.503 to broadly prohibit noncompetes against all “workers” and would prohibit noncompetes with “senior executives” after September 1, 2025.  If passed, the law would take effect on September 1, 2025.

The Bill prohibits a person (an undefined term under the Bill) from entering into or enforcing a noncompete with a “worker,” regardless of when such covenants were entered into.  The Bill broadly defines a “worker” as “an individual who works or previously worked, without regard to whether the individual was paid, to the worker’s title, or to the worker’s status under any other state or federal laws, including whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or sole proprietor who provides a service to a person.”

New York State may soon join the growing list of jurisdictions restricting or banning noncompete agreements. On June 7, 2023 the New York State Senate passed S 3100A (the “Bill”), which would prohibit employers from seeking, requiring, demanding, or accepting certain noncompete agreements.

Consider the following scenario that was the premise of the book Charlie and the Chocolate Factory (1964), and later adapted into the classic film Willy Wonka & the Chocolate Factory (1971): your company (Willy Wonka Chocolates) is in the candy business and develops an idea for an everlasting gobstopper (a sucking candy that never gets smaller).  Anticipating substantial profits from the product, the company designates the everlasting gobstopper formula as a trade secret.  As in the book and film, a rival chocolate company (Slugworth Chocolates) seeks to steal the trade secret ...