Non-compete agreements restrict employees from working for competitors after leaving a job. Employers often use them to protect trade secrets—but the relationship between non-competes and trade secret law is complicated. Understanding this relationship helps both employers designing protections and employees evaluating restrictions.
Non-Competes and Trade Secrets: Different Tools
Non-compete agreements and trade secret protection are distinct legal concepts that often overlap. Non-competes are contracts restricting where employees can work. Trade secret protection is a legal right preventing misuse of confidential information regardless of any agreement.
You don't need a non-compete to protect trade secrets—trade secret law applies regardless of contracts. But non-competes provide additional protection by preventing employees from being in positions where they might use confidential information, even inadvertently.
Why Employers Use Both
Trade secret protection requires proving misappropriation—that the former employee actually used or disclosed secrets. This can be difficult. Non-competes provide a simpler remedy: if the employee works for a competitor during the restricted period, they've violated the agreement regardless of whether they used specific information.
Non-competes also prevent inevitable disclosure—the concern that employees with extensive knowledge of secrets can't help but use that knowledge in similar roles at competitors, even without intentional disclosure.
Non-Compete Enforceability
Non-compete enforceability varies dramatically by state. California, North Dakota, Oklahoma, and Minnesota essentially prohibit non-competes. Other states enforce them if they meet certain requirements. A few states enforce them broadly.
Where enforceable, non-competes typically must be supported by adequate consideration (something of value to the employee), be reasonable in geographic scope, be reasonable in duration (usually 6 months to 2 years), and protect a legitimate business interest.
Trade secret protection is the most commonly recognized legitimate interest justifying non-competes. Courts are more likely to enforce agreements when employees had access to genuine trade secrets.
FTC Non-Compete Ban Developments
The Federal Trade Commission issued a rule in 2024 banning most non-competes nationwide. Legal challenges have created uncertainty about whether and when this rule takes effect. Check current developments, as the law in this area is rapidly evolving.
Even if non-competes become unenforceable, trade secret protection remains available. Employers should ensure they have strong trade secret programs regardless of non-compete developments.
Non-Solicitation Agreements
Non-solicitation agreements prohibit employees from soliciting customers or other employees after departure. These are generally more enforceable than non-competes because they're less restrictive—they don't prevent working for competitors, just targeting the former employer's relationships.
Customer lists and employee knowledge are often trade secrets themselves. Non-solicitation agreements protect these assets while allowing employees to work in their fields.
Confidentiality Agreements
Confidentiality agreements or NDAs directly prohibit disclosure and use of trade secrets. These are enforceable in virtually all states and don't face the restrictions that apply to non-competes.
Well-drafted confidentiality agreements provide strong protection without the enforceability concerns of non-competes. Many employers are shifting emphasis from non-competes to confidentiality agreements.
For Employees: Evaluating Restrictions
If you're subject to a non-compete, evaluate whether it's likely enforceable in your state, what legitimate secrets you actually have access to, and how the restriction affects your career options. Don't assume a non-compete is enforceable just because you signed it.
Be careful about confidentiality obligations—these are more likely enforceable and can result in liability if you use former employer information at a new job. Never take confidential documents or information when leaving.
For Employers: Designing Protection
Don't rely solely on non-competes—their enforceability is uncertain and varies by state. Build robust trade secret protection programs with confidentiality agreements, security measures, and documentation. Use non-competes where appropriate and enforceable, but as one layer of protection among many.
Narrowly tailor restrictions to actual business needs. Overly broad non-competes are more likely to be struck down or narrowed by courts.
Getting Legal Help
Both employers designing protection programs and employees evaluating restrictions should consult attorneys. Employment lawyers can advise on enforceability in your jurisdiction, draft appropriate agreements, or evaluate your obligations under existing contracts.