How do you protect your trade secrets? If the answer is by imposing non-compete clauses on your workforce, there’s bad news: As trends in trade secrets go, non-competes are on their way out.
Relying on non-compete clauses in contracts has historically been a very common and relatively easy way for a business to protect trade secrets and confidential information. By restricting departing employees from taking new positions in the same industry, employers hope their confidential and proprietary business information can be protected from their competitors. For many companies, imposing— and enforcing—a non-compete that restricts the worker is much easier than identifying any particular “secret” to protect. Indeed, that is what makes trade secret law so interesting. While other types of IP are defined by what they are—an invention, a writing, or a logo or design—trade secrets are largely defined by what you do. Do you keep it secret and is it valuable because it is secret?
But the use of blanket non-competes to protect business information is quickly becoming disfavored as policies protecting worker mobility rights gain steam. On July 9, 2021, President Biden signed an executive order to promote competition in the economy.1 Among other policy statements, the order identified non-compete agreements as a cause of a worsening imbalance between “[p]owerful companies,” restricting workers’ ability to change jobs and “making it harder for workers to bargain for higher wages and better work conditions.”2 The order encourages the Federal Trade Commission to exercise its rulemaking authority “to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility.”3 The White House hopes limiting these clauses will stimulate economic mobility by increasing competition and wages, and allow workers to change jobs more easily.4