EMPLOYEE DEFECTION AND TRADE SECRETS
LOOKING AHEAD TO 2025
Feds Will Be Less Interested in Regulating Non-Competes This is a fairly obvious prediction, but it needs to be emphasized. The Trump administration will quickly replace the NLRB GC, meaning her aggressive positions against non-competes and stay-or-pay provisions will be jettisoned by the end of January. Similarly, we’ll likely see new leadership at the FTC and the Department of Justice, so the efforts to ban non-competes on a federal level will die in the courthouse in the first quarter of 2025. Blue States Will Take Up the Fight Against Non-Competes But all that doesn’t mean your business is free and clear to do what it wishes. The last few years have seen an expansion of restrictions against non-competition agreements in traditionally progressive states (such as Colorado, Illinois, Massachusetts, Minnesota, Oregon, Virginia, and Washington), and we expect the pace to pick up in 2025. State lawmakers and governors in blue states will team up to respond to the Trump administration’s efforts to free up restrictive covenants, and we expect more of them will pass laws banning or limiting the use of non-compete restrictions. Be on the lookout in Delaware, Maryland, New Mexico, New York, Vermont, and Rhode Island, all of which seem likely to move in this direction. Additionally, attorneys general in the aforementioned states might get into the picture by bringing claims that certain types of restrictive covenants (such as those in the franchise context) constitute unfair competition. More Overlap Between Trade Secrets and Data Privacy Law States are passing an increasing number of data protection laws, which means the scope of employee access to sensitive information is also increasing. 2025 will see more situations where an employee who steals information in the final days of employment is going to (unwittingly) implicate data privacy laws as well as trade secret protection statutes. This is something that both plaintiffs and defendants will need to keep in mind. HAVE YOU MET BLUE PENCIL BOX? To stay up to speed on changes that will crop up in states across the country in 2025, check out one of FP’s latest offerings – Blue Pencil Box. This comprehensive resource not only provides detailed daily summaries of cases and laws involving non-competes and other restrictive covenants, but also maintains a comprehensive database and customizable checklists to help you comply.
2024 RECAP
Non-Compete Ban Struck Down The news that dominated 2024 was celebrated by many employers across the country: a Texas federal court struck down the FTC’s proposed non-compete ban mere weeks before it was set to take effect in September. Even though the FTC has several appeals pending in an effort to resurrect the rule, we anticipate the incoming administration will drop these efforts and cast the non-compete ban into the dustbin once and for all in 2025.
NLRB’s GC Doubled Down on Restrictive Covenant Attacks
The court setback described above didn’t stop the NLRB’s General Counsel from continuing her assault on restrictive covenants. Following her 2023 move to label just about all non-compete agreements as running afoul of the NLRA, GC Jennifer Abruzzo followed up in October by issuing a memo saying that many “stay- or-pay” provisions – agreements where workers are asked to repay their employer if they separate from employment – also violate federal law. But we also anticipate this memo to be swept aside shortly after the new administration takes office and most likely fires Abruzzo. Massive Court Award Demonstrates Reach of Trade Secrets Law Beyond Borders A federal appeals court applied U.S. trade secrets law to sales outside the country in a stunning July ruling, finding that Motorola was entitled to $407 million in damages from a foreign competitor for trade secrets misappropriation. A China-based company admitted to poaching key engineers who stole trade secrets and used them to develop a line of two-way radios identical to Motorola’s products. The 7th U.S. Circuit Court of Appeals concluded that Motorola was entitled to recover the competitor’s foreign profits from the misappropriation under the Defend Trade Secrets Act (DTSA). The ruling is good news for global businesses seeking damages in such situations – but comes with a few cautions, which you can read about here.
Michael P. Elkon
Robert Yonowitz
Atlanta Partner and Co-Chair, Employee Defection and
Irvine Partner and Co-Chair, Employee Defection and
Trade Secrets Practice Group melkon@fisherphillips.com
Trade Secrets Practice Group ryonowitz@fisherphillips.com
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