Employment Contracts, Restrictive Covenants, and Trade Secrets
This domain tests contract formation and breach in the employment setting, the enforceability of non-compete and non-solicit clauses, and trade secret protection under the DTSA and state UTSA statutes.
Contract basics
Offer, acceptance, consideration, and definiteness govern. At-will employment can itself be consideration in some states, but others demand new consideration such as a promotion, bonus, or access to confidential information; Illinois requires 14 days to review a non-compete and imposes income thresholds. Severance waivers for employees 40 and older must give 21 days (45 in group terminations) plus a seven-day revocation period under OWBPA.
Restrictive covenants
Courts enforce a non-compete only if it protects a legitimate interest (trade secrets, confidential information, customer goodwill), is reasonable in time, geography, and scope, and is not contrary to public policy. Outcomes vary sharply: California voids most non-competes (Bus. & Prof. Code §16600) and restricts choice-of-law clauses for California employees (Labor Code §925), while other states blue-pencil overbroad terms. The FTC's 2024 non-compete rule was vacated nationwide in Ryan LLC v. FTC, so state law controls. Customer non-solicits fare better than employee no-hire clauses, which can raise antitrust exposure.
Trade secrets
The Defend Trade Secrets Act provides a federal civil claim with a three-year limitations period, ex parte seizure in extraordinary cases, and immunity notice obligations for whistleblowers. Reasonable secrecy measures are essential. The inevitable-disclosure doctrine is accepted in some states and rejected in California.
Worked example
A sales director signs a two-year non-compete covering all of North America with no raise and no territory tie, then leaves for a competitor taking pricing files. Consideration is questionable where new consideration is required; the geographic scope exceeds her actual customer contacts and is likely unenforceable or narrowed. The pricing files support a DTSA claim with a three-year limitations period. Her counsel should check whether the agreement contained the required immunity notice.
Traps
- Assuming a non-compete is enforceable because it was signed.
- Ignoring state-specific consideration and notice statutes.
- Relying on the vacated FTC rule.
- Forgetting that a trade secret claim requires proof of reasonable secrecy measures.
- Overlooking the DTSA's three-year period and immunity notice requirement.