This browser is not actively supported anymore. For the best passle experience, we strongly recommend you upgrade your browser.

News & Insights

| 1 minute read

Fear a Ban on Noncompete Clauses will Expose Trade Secrets?

You're not alone.

On Tuesday, the FTC enacted a nationwide ban on the use of new noncompete clauses. The regulation will take effect in 120 days. Existing noncompetes for senior executives can remain in force, while for all other employees, existing noncompetes will not be enforceable.

Currently, noncompete clauses are generally unenforceable in California. “Every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.” (Bus. & Prof. Code, § 16600.)

The California Uniform Trade Secrets Act defines a trade secret as information that includes: a formula, pattern, compilation, program, device, method, technique, or process, that derives actual or potential independent economic value from not being generally known to the public or other persons who can obtain economic value from its disclosure or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. (Cal. Civ. Code, § 3426.1(d).) 

Traditionally, a noncompete clause is one way to maintain secrecy. However, here are seven other ways to increase protection of a company's trade secrets:

  1. Draft and enforce strong confidentiality agreements
  2. Employ reasonable security measures
  3. Entrust confidential information and trade secrets to those who “need to know”
  4. Use proper labeling by marking confidential and/or trade secret documents “confidential” 
  5. Be mindful of public disclosure (i.e., exclude confidential information and trade secrets from patent applications, publications, marketing materials, social media, advertisements, interviews, etc.)
  6. Prioritize employee well-being, work-life balance, and market compensation 
  7. Take reasonable steps to remedy any suspected misappropriation, including notifying counsel to consider immediate legal action if necessary

The above list is not exhaustive; we will keep you informed of new developments. 


[C]orporations concerned about protecting their intellectual assets can use restraints such as confidentiality agreements and trade secret laws, and don't need to resort to noncompete agreements, the FTC staff determined.


ftc, trade secrets, california law, california uniform trade secrets act, employment law, noncompete