Trade Secrets & Employee Mobility

In the wake of the nationwide injunction last year barring the Federal Trade Commission’s (FTC) attempted Noncompete Ban, states have continued to legislate the scope of enforceable restrictive covenants, especially noncompetes. In particular, many states are legislating specific rules for restrictive covenants for certain providers in the healthcare industry. In addition to the other states we previously reported noted, the latest wave of such states to pass legislation regarding noncompetes for health care providers includes Montana, Indiana, Colorado, Oregon, and Utah.

Prema Engineering S.r.l. (“Prema Engineering”) has accused automaker Automobili Lamborghini S.p.A. and Automobili Lamborghini America, LLC (collectively, “Lamborghini”) of stealing Prema Engineering’s intellectual property and trade secrets it supplies to Hypercars used in endurance racing. In Prema Engineering S.r.l. v. Automobili Lamborghini S.p.A., filed in the United States District Court for the Western District of Texas, Austin Division, Prema Engineering alleges that in 2024,  Lamborghini, while in a racing partnership with Prema Engineering and Iron Lynx racing team, stole Prema Engineering’s high-tech trade secret-protected steering wheel software in order to use it in Lamborghini’s new racing partnership with Riley Motorsports, a competitor of Prema Engineering and Iron Lynx.

Prema Engineering alleges that Lamborghini entered into a partnership with the Iron Lynx racing team, pursuant to which Lamborghini sold two Lamborghini-manufactured Hypercars to the Iron Lynx team and agreed to provide spare parts and other supply-related assistance for the Hypercars. Under the partnership, Prema Engineering was the exclusive provider of all servicing, maintenance, engineering and technical support to the Iron Lynx racing team.

On Spilling Secrets, our podcast series on the future of non-compete and trade secrets law, our panelists discuss the ins and outs of trying trade secret cases in a courtroom:

What’s the secret to winning a trade secret trial? Find out in this compelling episode of Spilling Secrets, where Epstein Becker Green attorneys Katherine G. Rigby, James P. Flynn, and Adam Paine break down the art of navigating these high-stakes cases.

From designing winning courtroom tactics and leveraging key witnesses to using storytelling as a tool to clarify complex trade secret claims, our panelists offer actionable insights and essential tips for safeguarding confidentiality and determining the right trial format to secure the best outcomes for your business.

We recently reported that Kansas was in a minority of states to enact employer-friendly restrictive covenant legislation.  Florida is on the verge of joining Kansas following the introduction of House Bill 1219 (“HB 1219”), which creates, in part, the “Florida Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act”. If enacted, HB 1219 will provide a framework for the use of permissible noncompete and garden leave agreements between a covered employer and covered employee. If passed, the bill would strengthen the enforceability of noncompete and/or garden leave agreements.

HB 1219 outlines certain noncompete and garden leave agreement requirements, such as confidentiality access and notice periods, to accept such agreements as enforceable. So long as the requirements are met, noncompete and garden leave agreements will not be considered a restraint of trade or an attempt to monopolize trade or commerce in violation of public policy. On April 23, 2025, the House voted 91-21 to pass HB 1219, and a day later, the Senate voted 28-9 to pass BH 1219. As of April 24, 2025, the bill was ordered and enrolled.

After the nationwide injunction barring the Federal Trade Commission (FTC) Noncompete ban, we reported that “employers can expect that states will continue to introduce legislation aimed at restricting the use of noncompetes.”  In the first few months of 2025, Virginia and Wyoming passed legislation restricting noncompetes, and Arkansas, Louisiana, and Maryland passed legislation restricting physician noncompetes.  We also reported on pending legislation in New York, Ohio, Texas, and Washington aimed at limiting noncompetes and other restrictive covenants. We are a third of the way through the calendar year, and July 1 (the date many laws go into effect) is approaching.  This post addresses legislation pending in seven other states that also seek to limit the use of noncompetes.

States Seeking To Ban All Noncompetes Both Retroactively And Prospectively

Michigan

In January 2025, Michigan introduced House Bill 4040 (HB4040) that if enacted, would prohibit businesses from entering into, enforcing, or representing the existence of noncompetes with any workers.  The only exceptions under the HB4040 are for a worker who sells their ownership stake in a business or a worker who is responsible for selling substantially all of the business’s assets.  If passed, Michigan would join California, Minnesota, North Dakota, and Oklahoma as the only states that broadly prohibit noncompetes between employers and employees.

Thomson Reuters Practical Law has released the 2025 Practice Note titled “Health Care Non-Competes,” authored by David J. Clark.

The Note discusses non-compete agreements in the health care sector, examining the legal and policy considerations impacting their enforceability. It highlights the unique challenges posed by health care non-competes, including patient access and continuity of care, and reviews state-specific statutes that restrict or prohibit these agreements for various health care workers. This Note discusses alternative restrictive covenants, such as non-solicitation and non-treatment agreements, and provides insights into the jurisdictional variations in non-compete enforceability. It also addresses ethical concerns raised by health care non-competes, particularly those affecting physicians, and examines the implications of telemedicine and health care deserts on non-compete enforcement. This Note offers guidance on best practices for drafting and enforcing non-competes. It is jurisdiction-neutral but will be useful to employers and their counsel in all jurisdictions.

On March 19, 2025, Wyoming became one of the latest states to enact legislation banning noncompete agreements. The new law, which goes into effect July 1, 2025, voids “[a]ny covenant not to compete that restricts the right of any person to receive compensation for performance of skilled or unskilled labor.” The law applies only to contracts entered into on or after July 1, 2025, and specifically states that nothing in the law alters, amends or impairs “any contract or agreement entered into before July 1, 2025.”  

The law, as drafted, broadly applies to any agreement containing a noncompete clause, such as an employment agreement, independent contractor agreement, or some other type of agreement. The law does not impact or address non-solicitation agreements.

Though the new law appears on its face to be far-reaching, it contains notable exceptions that effectively narrow the scope of noncompetes impacted by the law, discussed below.

In March of this year, Arkansas Governor Sarah Huckabee signed into law a bill titled “An Act To Clarify That a Covenant Not to Compete Agreement Is Unenforceable for Certain Licensed Medical Professionals" (the “Act”).  The Act amends Arkansas’s statute governing noncompete agreements to clarify that any noncompete that “restricts the right of a physician to practice within the physician’s scope of practice is void.” 

The Act is set to take effect 90 days after the conclusion of the current legislative session, so it is anticipated that the Act will take effect on or about July 15, 2025.  The Act does not state whether it applies prospectively only or whether it will have retroactive effect, and, therefore, invalidate existing physician noncompete agreements. 

The Act defines “physician” as any person authorized or licensed to practice medicine under the Arkansas Medical Practices Act or a person authorized to practice osteopathy under Arkansas statute. 

New York State Senator Sean Ryan recently introduced Senate Bill 4641 (the “Bill”) that proposes to ban noncompete agreements for most New York employees. If passed, the Bill would prospectively prohibit employers from enforcing noncompetes, except for highly compensated individuals who make an average of $500,000 or more per year and in the context of the sale of a business.  The Bill would not apply retroactively, so if passed, existing noncompetes would remain enforceable consistent with New York common law.

The Bill follows Governor Hochul’s December 2023 veto of Senate Bill 3100-A, also sponsored by Senator Sean Ryan, that sought to broadly ban noncompetes for all employees regardless of income. As we reported in December 2023, Governor Hochul stated that she would not sign an outright noncompete ban, but instead preferred a “balance” with a compensation threshold and a carveout for noncompetes entered into in connection with the sale of a business. The new Bill does just that.

After the nationwide injunction barring the Federal Trade Commission (FTC) Noncompete ban, we reported our anticipation that state legislatures would likely introduce legislation restricting the use of noncompetes. As expected New York, Washington, Virginia, Ohio, and Wyoming have all introduced—or enacted—legislation in 2025 aimed at limiting noncompetes and other restrictive covenants. On March 7, 2025, Texas joined this growing list of states when the Texas legislature introduced Texas House Bill 4067 (the “Bill”). If enacted, the Bill would amend Texas’s Business & Commerce Code by adding sections 15.501, 15.502, and 15.503 to broadly prohibit noncompetes against all “workers” and would prohibit noncompetes with “senior executives” after September 1, 2025.  If passed, the law would take effect on September 1, 2025.

The Bill prohibits a person (an undefined term under the Bill) from entering into or enforcing a noncompete with a “worker,” regardless of when such covenants were entered into.  The Bill broadly defines a “worker” as “an individual who works or previously worked, without regard to whether the individual was paid, to the worker’s title, or to the worker’s status under any other state or federal laws, including whether the worker is an employee, independent contractor, extern, intern, volunteer, apprentice, or sole proprietor who provides a service to a person.”