As everyone reading this likely knows, the FTC issued a noncompete rule purporting to ban noncompetes nationally. If not vacated by a court, the rule and, more importantly, the noncompete ban will take effect on September 4, 2024.
On Wednesday, August 7 (2024), Beck Reed Riden LLP hosted a brainstorming session with over 55 of the country’s leading trade secret / restrictive covenant / employee mobility lawyers.
The agenda was as follows:
- Brief overview of the rule
- What the rule says
- What’s banned?
- Exceptions
- Notice requirements
- What is required?
- Can it be modified/limited?
- Who gets notice?
- Cases that have settled with an agreed-upon injunction?
- How is it sent? (Personalized or bulk?)
- When is it required by? Is the deadline (9/3 or 9/4?)
- What is required?
- FTC’s enforcement powers
- Private right of action?
- Mini-FTC acts?
- What the rule says
- Brief update on the status of the cases
- Current cases/timing/expectations
- Other pending cases and likely cases
- Scope of injunction/nationwide injunction possibility
- Implications of the rule if not vacated nationally.
- What is the predicted fall-out on September 4 if the rule is not vacated nationally?
- Potential confusion in the state courts
- Strategies for complying with or otherwise responding to the rule
- Compliance with notice with no changes
- Compliance with conditions
- What types of conditions
- Issues that might arise
- Intervene in one of the cases
- Separate lawsuit
- Coordinated lawsuits to avoid the free-rider problem
- Ignore
- Risks
- Effect of good faith exception
- Effect of being a member in the US Chamber or other Texas plaintiff-association
- Can companies rely on the “existing causes of action” exception to claim that a cause of action has accrued for everyone’s noncompete in light of the legal challenges?
- Other options?
- Alternatives to noncompetes
- Having existing typical covenants
- Nondisclosure
- Beef up with acknowledgment of inevitable disclosure?
- Nonsolicit, no-service
- No-recruit, no-hire
- Disintermediation agreements
- Invention assignments
- Nondisclosure
- Other options
- Notice requirements / true garden leave
- Duration?
- Bilateral?
- Require it as a policy?
- Forfeiture provisions
- Retention bonuses
- Loans with payback
- Springing noncompete / time-out injunction
- Proactive secrecy management
- Notice requirements / true garden leave
- Having existing typical covenants
The recording of the brainstorming session is available here: Responding to California’s New, Expanded Anti-Restrictive Covenant Laws:
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Firm resources:
We know how hard it is to keep up with the ever-changing requirements around the country. To help, we have created the following resources (available for free):
- 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF) (to be updated for Rhode Island’s nurse exemption);
- Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable);
- Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF);
- 50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF).
- “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level;
- Trade secret and other legitimate business interest protection plan strategy and checklist; and
- Ten Minute Trade Secret Training Series, currently with three training videos and one “basics” video:
We hope you find all of these resources useful. More are coming.
And please note that we are grateful for all of the input we’ve received over the years, and welcome any suggestions for improvements that you may be willing to share.
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*A huge thank you to Erika Hahn for all of her extraordinary help in organizing the roundtable!