Cavitch Familo & Durkin, Co., L.P.A.
 

What if the FTC Bans Non-Competes: Trade Secret Protection

   

Written By: Max Dehn & Madilyn Maruna

The Federal Trade Commission (“FTC”) recently proposed a new rule that would effectively ban non-compete agreements.  The rule also impacts non-solicitation and confidentiality agreements that effectively function as non-competes. It may be that the FTC will succeed in this effort. That’s a big maybe. Either way, there is a long-developing trend across many states to limit or eliminate non-competes. So we have thoughts on what employers should do irrespective of whether or not the FTC is successful in this effort. We’ll discuss step one here.

Step One, protect your trade secrets!

  • Trade secrets are protected by state and federal law. They are broadly defined as information that has economic value to the owner, and which is not generally known or discoverable through proper means.
  • Trade secrets are legally protected only if the owner takes reasonable steps to maintain confidentiality. Examples of steps include:
    • Confidentiality Agreements
      • Be specific about what is being protected
      • Establish that the information may be stored electronically, on paper, or in the memory of the employee
      • Include customers and/or visitors
    • Physical locks and doors
    • Passwords
    • Business policies set forth in documents such as handbooks, shareholder and operating agreements, and similar business documents
  • Examples of trade secrets include:
    • Customer and supplier information (even if unwritten)
    • Production and operational methods
    • Formulas
    • Financial information.

No matter what happens with non-compete laws, state and federal trade secret laws provide protections for businesses that include injunctions and damages as remedies. But the protections are lost if the business fails to properly protect its trade secrets.

We’ll provide thoughts on “Step Two” for employer protection in our next blog.

As always, call us or email with questions.  Reach Max Dehn at 216-472-4649 or mdehn@cavitch.com or Madilyn Maruna at 216-472-4631 or mmaruna@cavitch.com.