Employment Tip Of The Month – December 2025

Q: What issues should be considered when an employer is drafting a non-compete agreement or restrictive covenant as to proprietary information?

A: Non-compete agreements and restrictive covenants are common tools that employers use to protect trade secrets, confidential information, and other important business interests. As contracts, these agreements require a clear offer, valid consideration, and mutual assent to be enforceable.

1. Important State Law Disclaimer

State laws governing non-competes and confidentiality obligations vary widely and change frequently. Some jurisdictions fully or partially prohibit employment non-competes (e.g., California, Oklahoma, North Dakota, and Minnesota), while others impose strict substantive and procedural requirements. There is no federal prohibition on employment non-competes, though policy scrutiny continues. Consult qualified counsel before drafting or enforcing any agreement.

2. Non-Compete Agreements

A non-compete agreement restricts an employee from engaging in certain competitive activities for a defined period, and within a defined geographic scope, after leaving employment. Employers should keep these key considerations in mind when drafting non-compete agreements:

Offer Consideration
A non-compete agreement must be supported by valid consideration in exchange for the employee's agreement to the restrictions. Valid consideration may include the initial employment, a promotion, additional compensation, or access to valuable company information.

Reasonable Restrictions
Reasonable restrictions must be narrowly tailored in duration, geographic scope, and prohibited activities, and no broader than necessary to protect legitimate business interests (e.g., customer relationships, confidential information, or trade secrets). Courts balance the employer's interest against the employee's ability to work, and enforceability varies by state. Prohibited activity may include: (1) working for specific competitors; (2) performing specified roles or research; or (3) soliciting the employer's customers.

Give Notice
The agreement should be clear, conspicuous, and employees should receive advance notice of the restrictions before signing.

Determine the Remedy for Violations
Specify available remedies in the event of a breach, such as injunctive relief, liquidated damages, compensatory damages, or attorneys' fees.

3. Restrictive Covenants

This article addresses restrictive covenants – sometimes referred to as confidentiality agreements or "NDAs" – that are designed to protect a company's proprietary information, trade secrets, and/or other confidential business materials. These agreements typically apply during employment and continue to apply even after termination. This article, however, does not address settlement-related confidentiality provisions or workplace "gag" restrictions concerning terms and conditions of employment, which are subject to significant limitations under various state statutes and the National Labor Relations Act. Consider the following when drafting restrictive covenants to protect proprietary information and/or trade secrets:

Define the Confidential Information
Clearly define "confidential information." Common approaches include: (1) a general description (i.e., marketing information, customer lists, procurement requirements); (2) a specific enumeration; or (3) requiring documents or tangible items to be marked "CONFIDENTIAL."

Information that is publicly available, generally known in the industry, or discovered by the employee prior to signing the restrictive covenant should not be defined as confidential information.

Offer Consideration
Similar to non-compete agreements, restrictive covenants must be supported by valid consideration in exchange for the employee's agreement to abide by the agreement's restrictions.

Provide Reasonable Restrictions
Confidentiality obligations do not typically terminate when the employment relationship ends, so it is essential that the restrictive covenant clearly sets forth the term. Most employers want the employee's confidentiality obligation to last at least as long as the information remains confidential. Include permitted disclosures (e.g., when required by court order or subpoena) and any notice requirements associated with such disclosures.

Determine Obligations of Receiving Party
Impose reasonable security measures or specify protocols (for example, secured storage and multi-factor authentication). Absent appropriate safeguards, a court may find secrecy methods insufficient and decline enforcement. Require the return or destruction of confidential information upon separation.

Conclusion
Every non-compete and restrictive covenant should be evaluated case-by-case to best protect an employer's confidential information and other legitimate interests. Because enforceability is highly state-specific and fact-dependent, consult qualified counsel before drafting or enforcing any agreement.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.