Over the last few years, the Biden administration and legislatures in dozens of states have increasingly focused on efforts to preserve employee mobility, most notably by increasingly placing limits on the use of restrictive covenants and targeting as anticompetitive other measures like no-poach clauses between competitors. Even though restrictive covenants are typically intended to protect legitimate interests of employers, such as the protection of trade secrets, admittedly these tools have been misused in certain instances. Similarly, no-poach clauses—regardless of how arguably well-meaning the intent behind their use—have come under increasing attack both by the Department of Justice (DOJ) and in the courts. At a time when trade secrets are perceived to be of growing importance to businesses, increased limitations on tools like these can have a significant impact on a company’s trade secrets protection efforts.

Legislative Efforts to Curtail the Use of Restrictive Covenants

So far this year, 29 legislatures have debated over 90 bills that seek to codify greater limits upon the application of restrictive covenants. Some proposals have been broad and sweeping, while others more limited. In Iowa and Kentucky, for example, restrictive covenant statutes apply only to nurses whereas in Delaware, New Hampshire, Connecticut, restrictive covenant statutes protect medical professional generally—likely a direct effect of the pandemic. Conversely, in Washington D.C., Colorado and Illinois, newly enacted statutes provide broad protections for all workers based on income thresholds rather than market sector. Despite these differences, the general trend is toward protecting the free movement of labor by making restrictive covenants inapplicable for a growing number of workers.