During the recent Employment Law Symposium organized by Ward and Smith, legal experts delved into critical topics impacting employers. The discussions highlighted significant changes in regulations, particularly concerning Immigration and Customs Enforcement (ICE), noncompete agreements, trade secrets, and compliance with diversity, equity, and inclusion (DEI) programs.
The session began with an examination of noncompete agreements, where Emily Massey, a North Carolina State Bar Board Certified Specialist in Employment Law, addressed the current landscape. She pointed out that a federal judge in Texas recently halted a regulation from the Federal Trade Commission (FTC) that aimed to ban most forms of noncompete agreements in the United States. This decision preserved the status quo, leaving many employers uncertain about their legal standing regarding such agreements.
Massey explained, “The FTC had passed a regulation banning most forms of noncompete agreements in the U.S. A federal judge in Texas halted the ban.” She noted that the previous administration had appealed this decision but, shortly after her talk, the Trump administration withdrew the appeal. This shift suggests that the National Labor Relations Board (NLRB) may exert less scrutiny over noncompete agreements moving forward, particularly after the new General Counsel rescinded several memoranda from the past administration.
The trend across various states indicates a movement toward restricting the use of noncompete agreements, especially those deemed overly broad. Notably, Virginia has banned such agreements for non-exempt employees eligible for overtime under the Fair Labor Standards Act (FLSA). In contrast, Florida has enacted changes that are more accommodating to noncompete agreements, while Kansas has introduced provisions for non-solicitation agreements that allow courts to modify overly broad covenants, fostering a more business-friendly environment.
Massey emphasized the importance of reviewing noncompete agreements to ensure they are tailored appropriately. “This is why we advise you to review any noncompete agreements you have and ensure they’re narrowly tailored or to use another avenue to protect your business, such as a non-solicitation agreement,” she stated.
The discussion then shifted to the protection of trade secrets, with insights from litigation attorney Gavin Parsons. He highlighted the broad definition of trade secrets, which encompasses any valuable information that a business takes reasonable steps to protect from disclosure. “It’s confidential and it needs to have independent economic value to the business, or potentially, to the competitors of the business,” Parsons explained.
Organizations may already possess trade secrets without realizing it. Examples include information collected from research and development, client data in customer relationship management systems, and proprietary manufacturing processes. Parsons noted a growing trend toward using agreements to safeguard trade secrets due to the increasing limitations on noncompete agreements.
“Employees can leave more freely now, so employers have to be more proactive about protecting their information,” he added. The rise of technology has also contributed to this need, as digital information is easier to steal and share than ever before. “Information is a lot easier to download and transmit than it used to be,” Parsons remarked, pointing out that remote work environments may lead to less scrutiny of employee actions.
To effectively protect trade secrets, employers should establish clear policies during the onboarding process and maintain rigorous controls over digital information. “If you can, keep your data somewhere you can monitor how employees use it, so you can spot unusual activity,” advised Parsons.
The rising use of artificial intelligence (AI) in the workplace presents additional challenges for trade secret protection. Parsons explained that AI’s ability to generate information could inadvertently expose trade secrets if not handled correctly. “To safeguard information, organizations should be cautious and never provide information to an outside AI program,” he cautioned.
Overall, the symposium underscored the evolving legal landscape surrounding employment law, emphasizing the need for employers to stay informed and proactive. As regulations continue to shift, particularly regarding noncompete agreements and trade secrets, businesses must adapt their strategies accordingly to ensure compliance and protect their interests.
