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Illinois employers now have a concrete measure of the risks associated with systemic noncompliance with the Illinois Freedom to Work Act. On October 9, 2026, the Illinois Attorney General announced a $1.9 million settlement with Equinox Holdings, Inc., the operator of well-known upscale fitness clubs, resolving allegations that the company required hundreds of Illinois employees to sign non-compete and non-solicitation agreements that violated the Act.

The $1.9 Million Equinox Settlement

Under the settlement, Equinox agreed to pay $990,000 in restitution to affected employees and a $910,000 civil penalty. Equinox also agreed to bring its current agreements into compliance with the Act within 21 days and to provide annual training on the Act to managerial employees. The resolution demonstrates that restrictive-covenant compliance is not merely an enforceability issue that arises when an employer seeks to hold a departing employee to an agreement. A pattern of noncompliant agreements may itself lead to a government investigation, substantial monetary liability, remediation obligations, and ongoing compliance requirements.

The State’s Claims Against Equinox

The settlement followed a complaint filed in Cook County Circuit Court on October 7, 2026. The State alleged that Equinox employed more than 600 people in Illinois during the relevant period and entered into agreements containing non-competes, non-solicits, or both with more than 300 part-time or full-time employees whose actual or expected annualized earnings did not exceed the Act’s statutory thresholds.

The complaint asserted three principal violations: Equinox allegedly entered into non-competes with employees earning $75,000 or less; entered into non-solicitation agreements with employees earning $45,000 or less; and failed to advise affected employees in writing to consult with an attorney or provide them with the required 14-day review period.

The State also alleged that Equinox retained counsel and attempted to revise its agreements before the Attorney General opened its investigation in July 2025, but that those changes did not cure the violations. That allegation is particularly notable: a good-faith compliance initiative may not eliminate exposure if the revised documents or the process used to issue them remain deficient.

How the IFWA Changed Illinois Law

Illinois has long evaluated restrictive covenants under a common-law reasonableness framework focused on adequate consideration, legitimate business interests, hardship to the employee, and injury to the public. The Illinois Freedom to Work Act, first enacted in 2017, initially prohibited non-competes for “low-wage employees,” a category defined by reference to minimum-wage and hourly compensation measures.

Amendments effective January 1, 2022, substantially expanded the statute. For agreements entered into on or after that date, the Act imposed separate earnings thresholds for non-competes and non-solicits, codified substantive enforceability requirements, added mandatory notice and review protections, created a fee-shifting remedy for employees who prevail against enforcement efforts, and expressly authorized Attorney General investigations and civil enforcement.

Through the end of 2026, an employer may not enter into a non-compete unless the employee’s actual or expected annualized earnings exceed $75,000, or a non-solicit unless earnings exceed $45,000. Effective January 1, 2027, those thresholds increase to $80,000 and $47,500, respectively, with additional increases scheduled for 2032 and 2037.

The 2022 amendments also require employers to advise employees in writing to consult with an attorney and to provide the proposed covenant at least 14 calendar days before employment begins or, for an existing employee, at least 14 days to review it. An employee may voluntarily sign before the end of that period, but the employer must provide the full opportunity for review. Even when an employee clears the applicable earnings threshold, the covenant must still be supported by adequate consideration, be ancillary to a valid employment relationship, be no broader than necessary to protect a legitimate business interest, avoid undue hardship, and not injure the public.

The Act’s enforcement provisions gave those requirements additional force. The Attorney General may investigate suspected violations and bring or intervene in civil actions involving a pattern or practice. The State may seek civil penalties of up to $5,000 for each violation and up to $10,000 for each repeat violation within a five-year period, with each affected employee treated as a separate violation.

The Message for Illinois Employers

The Equinox settlement illustrates the risk for Illinois employers. A noncompliant covenant is not simply vulnerable to being declared unenforceable in a dispute with a former employee. Widespread use of the same deficient agreement or process may produce an Attorney General investigation, per-employee penalties, restitution, injunctive relief, mandatory remediation, training obligations, and reputational consequences.

Employers should therefore review both the substance of their restrictive covenants and the processes by which those agreements are issued. That review should confirm that compensation is measured correctly, the increased 2027 thresholds are incorporated, required notices are delivered, the 14-day review opportunity is documented, and onboarding and electronic-signature systems preserve evidence of compliance. Employers that identify deficiencies should consider a documented remediation plan addressing existing agreements, employee communications, revised templates, responsible personnel, and recurring training.

The broader lesson is straightforward: Illinois employers should treat IFWA compliance as an enterprise-wide contracting and process obligation—not merely as an issue to be evaluated after an employee leaves and enforcement is contemplated.

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As part of Seyfarth’s 2026 Trade Secrets Webinar Series, our panel presented From Prompt to Proof: Investigating and Litigating Trade-Secret Theft in the Age of AI, exploring how artificial intelligence is transforming the way organizations create, use, protect, investigate, and litigate trade secrets.

Jesse Coleman and Gio Perez of Seyfarth Shaw LLP, together with Jim Vaughn of iDiscovery Solutions, discussed the growing intersection of AI, trade secret protection, employee mobility, digital forensics, and cybersecurity. Drawing on their experience in litigation, investigations, and AI governance, the panel examined practical steps organizations can take to protect valuable confidential information while embracing new technologies.

View the Recording – CLE credit for this recording expires on September 8, 2027. Please refer to the program description for jurisdiction-specific details and deadlines.

Key Takeaways

AI-Related Trade Secrets Extend Beyond the Data Entered Into a Tool

Organizations often focus on the information employees input into AI systems, but protectable trade-secret value may exist throughout the broader AI ecosystem. Proprietary training and evaluation methods, AI-generated insights, unique workflows, prompts, datasets, model configurations, and human review processes can all contribute to a company’s competitive advantage. In many cases, the value lies not in a single component, but in the unique combination of technologies, data, and expertise that make up an organization’s AI stack.

Using AI Does Not Automatically Destroy Trade Secret Protection

The use of AI tools does not necessarily eliminate trade-secret protection, but the surrounding safeguards matter. Courts evaluating whether information remains protectable will likely examine the specific AI platform involved, the account used, applicable contractual terms, confidentiality and retention protections, employee authorization, and the company’s overall governance practices. Decisions made today regarding AI implementation and oversight may later become critical evidence in demonstrating that reasonable measures were taken to preserve secrecy.

AI Changes the Evidence, Not the Core Legal Inquiry

Traditional trade secret principles continue to apply, but AI can complicate the evidentiary picture. Because AI tools can summarize, transform, and synthesize information without reproducing source material verbatim, organizations must be prepared to trace the full lifecycle of confidential information from inputs to outputs and any resulting competitive use. Effective investigations should focus not only on source files, but also on prompts, outputs, derivatives, implementation efforts, and indicators of downstream use.

AI Controls Should Follow the Entire Employee Lifecycle

Managing AI-related risk requires more than a standalone policy. Organizations should address AI usage during onboarding, throughout employment, and during offboarding. This includes preventing the introduction of prior-employer confidential information, identifying approved tools and acceptable uses, restricting access to sensitive information, and reviewing personal AI accounts and AI-generated materials when employees depart. Consistent controls throughout the employment lifecycle can help reduce risk and strengthen legal protections.

Effective AI Governance Requires Practical Rules and Strong Vendor Management

Rather than attempting to prohibit AI outright, organizations should provide employees with clear, practical guidance regarding permitted uses. The panel discussed the value of developing usage frameworks that distinguish between permitted, controlled, approval-required, and prohibited activities. Organizations should also conduct diligence on AI providers, understand how company information is accessed, retained, and protected, and ensure contractual protections align with the organization’s expectations and risk tolerance.

Reasonable Measures Must Be Implemented and Provable

Written policies alone are rarely enough to establish trade-secret protection. Organizations should be prepared to demonstrate that they identified the information they intended to protect, trained employees on their obligations, restricted access appropriately, approved the use of specific tools, documented vendor diligence efforts, and responded promptly to potential disclosures. The same measures that help prevent misappropriation can also strengthen a company’s position if litigation becomes necessary.

Final Thought

While AI is changing how confidential information is created, used, and potentially misappropriated, the fundamental principles of trade-secret protection remain the same. Organizations that take proactive steps to implement governance frameworks, employee training, technical safeguards, and defensible investigative processes will be better positioned to leverage AI’s benefits while protecting their most valuable proprietary information.

To ensure you don’t miss future sessions, subscribe to our Litigation – Trade Secrets & Non-Competes mailing list. For tailored programs, our attorneys are available to present customized sessions for your organization. Subscribe to our Trading Secrets blog for ongoing insights on trade secrets, employee mobility, and information governance.

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Thursday, October 15, 2026
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

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About the Program

As employers face increasing restrictions on the use and enforceability of non-compete agreements, organizations must evaluate alternative strategies for protecting their confidential information, trade secrets, customer relationships, and workforce investments.

Join Seyfarth for the next installment of our Trade Secrets Webinar Series, where we will explore the evolving landscape of restrictive covenants and the practical tools employers can use to protect their business interests beyond traditional non-compete agreements.

Through practical examples and actionable guidance, this program will examine a range of alternative protections available to employers, including confidentiality and non-disclosure agreements, employee and customer non-solicitation provisions, garden leave arrangements, term employment agreements, and forfeiture-based protections. The discussion will also address state-specific considerations, including developments in jurisdictions that have significantly limited or restricted the use of non-compete agreements.

In addition to contractual protections, the webinar will explore operational strategies for safeguarding proprietary information, including effective onboarding and offboarding procedures, recovery of company devices and data, and other best practices designed to reduce risk and protect valuable business assets throughout the employment lifecycle.

Key Discussion Points

  • Recent developments affecting non-compete agreements and restrictive covenants, including state-specific considerations
  • Practical alternatives to traditional non-compete agreements, including:
    • Non-disclosure agreements and other confidentiality protections
    • Employee and customer non-solicitation provisions
    • Garden leave arrangements, including jurisdiction-specific considerations
    • Term employment agreements
    • Forfeiture-for-competition provisions
  • Trade secret protection strategies and safeguarding proprietary information
  • Effective onboarding and offboarding procedures, including device and data recovery
  • Developing a comprehensive protection strategy

This webinar is designed for in-house counsel, HR professionals, business leaders, compliance professionals, and others responsible for protecting proprietary information, customer relationships, and competitive advantages in an evolving regulatory environment.

Speakers

Dan Hart, Partner, Seyfarth Shaw LLP
Beth Sherwood, Counsel, Seyfarth Shaw LLP
Travis Cashbaugh, Associate, Seyfarth Shaw LLP

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If you have any questions, please contact Sela Sofferman at ssofferman@seyfarth.com and reference this event.

Learn more about our Trade Secrets, Computer Fraud & Non-Competes practice.

To comply with State CLE Requirements, CLE forms requesting credit in IL or CA must be received before the end of the month in which the program took place. Credit will not be issued for forms received after such date. For all other jurisdictions forms must be submitted within 10 business days of the program taking place or we will not be able to process the request.

Our live programming is accredited for CLE in CA, IL, and NY (for both newly admitted and experienced).  Credit will be applied as requested, but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. CLE decisions are made by each local board, and can take up to 12 weeks to process. If you have questions about jurisdictions, please email CLE@seyfarth.com.

Please note that programming under 60 minutes of CLE content is not eligible for credit in GA. programs that are not open to the public are not eligible for credit in NC.

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For more than a decade, health care noncompete legislation largely focused on a familiar target: physician restrictive covenants.

That paradigm is rapidly disappearing.

Across the country, legislatures are no longer asking simply whether physician noncompetes should be enforceable. Instead, states are adopting increasingly diverse regulatory frameworks that address workforce mobility, market concentration, patient access, continuity of care, and the role of staffing intermediaries.

The result is a patchwork that can no longer be understood through a simple distinction between states that permit health care noncompetes and states that prohibit them. Instead, several identifiable regulatory models have emerged.

Understanding these models is becoming increasingly important for health care systems, private-equity-backed physician groups, staffing companies, and in-house counsel responsible for managing multistate workforces.

From Physician Noncompetes to Health Care Workforce Regulation

Historically, health care noncompete restrictions focused predominantly on physicians.

Today, however, statutory protections reach a much broader spectrum of health care professionals, including advanced practice registered nurses, physician assistants, behavioral-health providers, social workers, counselors, and some temporary staffing personnel.

Recent enactments in Utah and Virginia illustrate this shift.

For agreements entered into on or after May 6, 2026, Utah prohibits health care noncompetes covering an enumerated group of licensed practitioners whose work requires or involves practice under the license, subject to the statute’s definitions and exceptions.[1]

Virginia likewise prohibits employers from entering into, enforcing, or threatening to enforce noncompetes against professionals licensed, registered, or certified by specified health regulatory boards, for covenants entered into on or after July 1, 2026.[2]

The result is a gradual transition from profession-specific regulation toward broader health care-workforce regulation.

Model One: Profession-Based Protection

Several states regulate health care noncompetes by identifying particular professions that warrant special protection.

At the narrower end of the spectrum, some states protect discrete categories of providers.

New Jersey’s psychology regulations treat agreements that limit a client’s freedom to choose a psychologist as unethical, while Iowa voids specified geographic, temporal, and former-patient restraints for covered mental-health professionals.[3]

Other states focus primarily on physicians.

Arkansas generally makes physician noncompetes void, subject to statutory application rules and exceptions.[4]

Wyoming likewise makes physician noncompetes void, while allowing a departing physician to disclose the physician’s continuing practice and new professional contact information to certain patients without liability for damages resulting from the disclosure or subsequent treatment.[5]

Still others protect physicians and additional licensed professions.

Rhode Island prohibits noncompetes involving physicians and advanced practice registered nurses.[6]

Massachusetts makes physician noncompetes unenforceable and separately bars specified restrictions involving nurses, psychologists, and social workers.[7]

These statutes reflect a legislative choice to limit competitive restraints for professions closely connected to patient access and continuity of care.

Model Two: Regulated Use

A second group of states permits some health care noncompetes but subjects them to traditional statutory restrictions, on duration, geographic limits, and other terms.

Texas remains a prominent example.

For covered physician covenants, current law requires, among other protections, a buyout, access to specified patient information, no more than a one-year restriction, and a geographic limit of no more than five miles from the physician’s primary practice location; a covenant is not enforceable when the physician is discharged without good cause.[8]

In West Virginia, a covenant for a physician may not exceed one year or extend more than 30 road miles from the physician’s primary place of practice.[9]

Pennsylvania’s Fair Contracting for Health Care Practitioners Act generally voids covered noncompetes, but permits a restriction of one year or less when a practitioner voluntarily terminates employment.[10]

The Act also imposes patient-notification duties when a practitioner departs.[11]

These statutes preserve some employer protections while prescribing limits tied to mobility and patient access.

Model Three: Conditional Restrictions

Other states make enforceability depend on specific policy conditions.

The District of Columbia generally prohibits noncompetes but preserves a limited exception for highly compensated employees, which includes medical specialists whose compensation satisfies the statutory requirements (currently $270,274).[12]

Maryland regulates health care noncompetes through multiple layers of statutory restrictions: the statute is triggered only when a practitioner is licensed under the Health Occupations Article, provides direct patient care, and falls within the statutory compensation threshold; once triggered, it imposes limits on the duration, geographic scope, and other terms of the restriction.[13]

Other statutes focus on employer identity.

Indiana prohibits hospitals, hospital systems, parent companies, affiliated managers, and specified hospital-related entities from entering into covered physician noncompetes for agreements originally entered into on or after July 1, 2025.[14]

Still others focus on market concentration or public-access programs.

Florida makes certain physician restrictive covenants void when one entity employs or contracts with all physicians practicing the same specialty in a county, subject to the statute’s definitions and exceptions.[15]

Nevada separately makes void a noncompete that restricts a physician from practicing medicine after the physician’s employment is terminated if the physician was employed as part of a federal J-1 visa waiver program.[16]

These states are not rejecting restrictive covenants outright. Instead, they are attempting to identify circumstances where enforcement threatens broader health care policy goals.

Three Emerging Trends

Expansion Beyond Physicians

The most obvious trend is expansion beyond physicians. Recent legislation increasingly covers nurses, physician assistants, behavioral-health providers, counselors, psychologists, social workers, and other licensed professionals. The shift suggests legislative concern about health care labor shortages generally rather than physician shortages specifically.

Patient Choice as an Independent Policy Objective

A second trend involves patient access and continuity of care. Increasingly, states are separating patient communication rights from noncompete enforceability. Even where some restrictive covenants remain permissible, legislatures often require departing providers to maintain the ability to communicate with patients and preserve continuity of care. For example, Pennsylvania requires specified patient notice after a practitioner’s departure, while Utah’s statute excludes from certain health care worker nonsolicitation agreements communications concerning the practitioner’s departure or new practice location.[17]

Growing Scrutiny of Staffing Intermediaries

Perhaps the least discussed trend involves health care staffing agencies and labor platforms. Several states[18] have begun restricting noncompetes imposed by temporary staffing firms, health care employment agencies, and health care technology platforms. These statutes recognize that health care labor increasingly flows through intermediaries that did not exist when many traditional physician-noncompete statutes were enacted. As staffing shortages persist nationwide, legislative attention to these intermediaries is likely to intensify.

What Comes Next?

The future of health care noncompete regulation is unlikely to consist exclusively of outright bans. Instead, the more significant trend may be the proliferation of targeted statutory regimes designed to address specific health care-policy concerns.

Some legislatures will continue focusing on physician mobility. Others will prioritize continuity of care, workforce retention, rural health care access, staffing shortages, or market concentration. What unites these efforts is a growing view that health care labor markets differ from ordinary labor markets and therefore warrant specialized regulation.

For health care employers operating across state lines, that means compliance can no longer be managed through a single restrictive-covenant template. The question is no longer whether a state permits health care noncompetes. Increasingly, the question is which regulatory model the state has adopted and what policy objective that model is designed to advance.

[1]Utah Code Ann. §§ 34-51-102, 34-51-202

[2]Va. Code Ann. § 40.1-28.7:8

[3]N.J. Admin. Code § 13:42-10.16.; Iowa Code § 147.164.

[4]Ark. Code Ann. § 4-75-101.

[5]Wyo. Stat. Ann. § 1-23-108.

[6]5 R.I. Gen. Laws §§ 5-37-33, 5-34-50.

[7]Mass. Gen. Laws ch. 112, §§ 12X, 74D, 129B, 135C.

[8]Tex. Bus. & Com. Code Ann. § 15.50(b)-(c).

[9]W. Va. Code § 47-11E-2.

[10]35 Pa. Cons. Stat. § 10324(b).

[11]35 Pa. Cons. Stat. § 10325.

[12]D.C. Code §§ 32-581.01 to 32-581.03.

[13]Md. Code Ann., Lab. & Empl. § 3-716.

[14]Ind. Code §§ 25-22.5-5.5-1 to 25-22.5-5.5-2.5.

[15]Fla. Stat. § 542.336.

[16]Nev. Rev. Stat. § 439A.175(2)(b)(1).

[17]35 Pa. Cons. Stat. § 10325.; Utah Code §§ 34-51-102, 34-51-202, 34-51-203.

[18] 225 Ill. Comp. Stat. 510/14(g).; Iowa Code § 135Q.1-3.; Ky. Rev. Stat. § 216.724.; L.B. 921.

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Wednesday, September 9, 2026
1:00 p.m. to 2:00 p.m. Eastern
12:00 p.m. to 1:00 p.m. Central
11:00 a.m. to 12:00 p.m. Mountain
10:00 a.m. to 11:00 a.m. Pacific

About the Program

Artificial intelligence is transforming how companies create, use, and protect their most valuable confidential information. While the legal definition of a trade secret remains largely unchanged, AI has fundamentally altered how sensitive information is created, transmitted, retained, transformed, discovered, and misappropriated.

Join Seyfarth for the next installment of our Trade Secrets Webinar Series, where our multidisciplinary team will explore the growing intersection of AI, trade secrets, employee mobility, and digital forensics. Through real-world examples and practical guidance, our speakers will examine how organizations can leverage AI tools while minimizing the legal, operational, and technical risks that accompany them.

Drawing on experience in trade secret litigation, AI governance, cybersecurity, and forensic investigations, our panel will provide actionable strategies for protecting proprietary information throughout the entire trade-secret lifecycle, from creation and classification to incident response, litigation, and damages.

Key Discussion Points

  • How AI is reshaping the trade-secret lifecycle and creating new litigation risks
  • What qualifies as a trade secret in an AI-enabled environment
  • Whether disclosure to AI platforms may impact trade-secret protection
  • Developing effective AI governance, vendor management, and employee-use policies
  • Practical considerations for onboarding, training, monitoring, and offboarding employees
  • Investigating suspected AI-related misappropriation and preserving key evidence
  • Digital forensic sources that can reveal AI use, data transfers, and unauthorized disclosures
  • Litigation strategies, expedited discovery, emergency relief, and damages considerations
  • Technical safeguards organizations should consider when implementing AI tools
  • Preparing for the next generation of trade-secret disputes involving AI-generated outputs and workflows

This webinar is designed for in-house counsel, HR professionals, compliance leaders, information security teams, executives, and others responsible for protecting confidential and proprietary business information.

Speakers

Jesse Coleman, Partner, Seyfarth Shaw LLP
Gio Perez, Associate, Seyfarth Shaw LLP
Jim Vaughn, Senior Managing Director, iDiscovery Solutions

REGISTER HERE

If you have any questions, please contact Sela Sofferman at ssofferman@seyfarth.com and reference this event.

Learn more about our Trade Secrets, Computer Fraud & Non-Competes practice.

To comply with State CLE Requirements, CLE forms requesting credit in IL or CA must be received before the end of the month in which the program took place. Credit will not be issued for forms received after such date. For all other jurisdictions forms must be submitted within 10 business days of the program taking place or we will not be able to process the request.

Our live programming is accredited for CLE in CA, IL, and NY (for both newly admitted and experienced).  Credit will be applied as requested, but cannot be guaranteed for TX, NJ, GA, NC and WA. The following jurisdictions may accept reciprocal credit with our accredited states, and individuals can use the certificate they receive to gain CLE credit therein: AZ, AR, CT, HI and ME. For all other jurisdictions, a general certificate of attendance and the necessary materials will be issued that can be used for self-application. CLE decisions are made by each local board, and can take up to 12 weeks to process. If you have questions about jurisdictions, please email CLE@seyfarth.com.

Please note that programming under 60 minutes of CLE content is not eligible for credit in GA. programs that are not open to the public are not eligible for credit in NC.

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As organizations increasingly incorporate AI into recruiting, workforce planning, employee monitoring, and performance management, the legal risks extend beyond privacy and employment law. You may find thought leadership from our colleagues regarding the EU AI Act useful. In their recent Westlaw Today article, Yana Komsitsky, Paul Whinder, and Georgia Hill Smith examine what types of workplace AI tools are likely to be classified as high-risk under the EU AI Act and the governance structures organizations should be building to prepare for compliance, alongside existing laws governing automated processing, including GDPR and others coming online across the US and elsewhere. For businesses seeking to leverage AI while protecting proprietary information, maintaining workforce trust, and managing compliance obligations across jurisdictions, the article offers a timely roadmap. This article is useful insight for developers into the deployer assessment process.

Why This Matters

  • AI tools are becoming embedded in workforce management processes that can directly affect employee careers and business operations.
  • Governance failures can create legal, compliance, and employee relations risks.
  • Organizations should understand how AI tools are being deployed across the enterprise before expanding their use.

The full article is available here.

PDF republished with permission from Thomson Reuters Westlaw Today.

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Upon President Trump’s reelection and his immediate termination of not only former General Counsel Jennifer Abruzzo of the National Labor Relations Board (“NLRB”) but also Board Member Gywnne Wilcox, it was apparent that changes would soon be coming to the agency. One of the most significant early shifts occurred on February 14, 2025, when then-acting General Counsel of the National Labor Relations Board William Cowen rescinded several memoranda Abruzzo had previously issued.

One of these, Memorandum GC 23-08, was issued on May 30, 2023, and stated that “[e]xcept in limited circumstances,” the “proffer, maintenance, and enforcement” of non-compete agreements violates the National Labor Relations Act (the “Act”). See NLRB, Office of the General Counsel, Non-Compete Agreements that Violate the National Labor Relations Act, Memorandum GC 23-08, at p. 1 (May 30, 2023) (rescinded Feb. 24, 2025).

Another rescinded memorandum, Memorandum GC 25-01, was issued on October 7, 2024, and built on the first by making recommendations for “remedying the harmful effects of” not only noncompete agreements, but also “stay-or-pay” provisions such as training repayment agreement provisions (also known as “TRAPs”), educational repayment contracts, quit fees, damages clauses, and even sign-on bonuses tied to specific stay periods. See NLRB, Office of the General Counsel, Remedying the Harmful Effects of Non-Compete and “Stay-or-Pay” Provisions that Violate the National Labor Relations Act, Memorandum GC 25-01 (Oct. 7, 2024) (rescinded Feb. 14, 2025).

Continue Reading Cementing Directional Shift: NLRB Advice Memorandum Confirms Lawfulness of Non-Competes and Raises Questions About Separation Agreements
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As part of Seyfarth’s 2026 Trade Secrets Webinar Series, our panel presented Digital Exfiltration & Departing Employees: Protecting Trade Secrets in a Modern Risk Environment, examining the growing risks organizations face as employee mobility increases and technology creates new avenues for information transfer.

Jay Carle, Marcus Mintz, and Joe Greenfield of Maryman led a practical discussion for in-house counsel, HR professionals, executives, and business leaders focused on identifying, preventing, and responding to trade secret theft and data exfiltration.

View the Recording – CLE credit for this recording expires on June 17, 2027. Please refer to the program description for jurisdiction-specific details and deadlines.

Key Takeaways

Most Trade Secret Risks Begin with Departing Employees

Departing employees remain one of the leading sources of trade secret misappropriation. Organizations often have only a narrow window to identify suspicious activity before valuable confidential information leaves the company. The consequences can include lost competitive advantage, costly litigation, and reputational damage.

Data Can Leave the Organization in More Ways Than Ever

Today’s exfiltration methods extend far beyond USB drives. Employees can transfer information through personal devices, cloud storage platforms, personal email accounts, remote-access software, printed documents, mobile device photos, and even AI tools. Understanding these evolving pathways is essential for building an effective prevention strategy.

Prevention Requires a Layered Approach

No single safeguard is enough. Effective protection combines strong legal agreements, clear technology-use policies, and technical security controls. Well-drafted confidentiality agreements, BYOD and AI-use policies, data loss prevention tools, multi-factor authentication, and data classification programs work together to reduce risk and improve defensibility when issues arise.

Watch for Behavioral Red Flags

Technical monitoring is important, but human behavior often provides the earliest warning signs. Unusual after-hours downloads, sudden interest in information outside an employee’s responsibilities, requests for expanded access, declining engagement, or communications with competitors can all warrant closer review. Early detection frequently makes the difference between preventing a loss and responding to one.

Speed and Documentation Are Critical When Someone Leaves

Organizations should have a well-defined departure playbook that includes exit interviews, certification of data return or deletion, forensic preservation procedures, and cross-functional coordination among Legal, HR, and IT. If misconduct is suspected, the first 72 hours are often the most important. Thorough documentation before, during, and after an employee’s departure can be invaluable in any subsequent investigation or litigation.

Final Thought

Protecting trade secrets is not solely a legal, HR, or IT responsibility. Success requires a coordinated, proactive approach that combines policies, people, and technology. Organizations that prepare before a high-risk departure occurs are far better positioned to prevent data loss and respond effectively when concerns arise.

To ensure you don’t miss future sessions, subscribe to our Litigation – Trade Secrets & Non-Competes mailing list. For tailored programs, our attorneys are available to present customized sessions for your organization. Subscribe to our Trading Secrets blog for ongoing insights on trade secrets, employee mobility, and information governance.

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The North Carolina Business Court recently issued a decision that serves as a sharp reminder that California’s hostility to restrictive covenants can reach well beyond its borders—and attempting to enforce a void restriction may itself create liability.

BioSkryb, a North Carolina–based biotechnology company, removed one of its co-founders and former executives, Jason West, in 2024. Shortly thereafter, and following his resignation from BioSkryb’s board of directors, Mr. West formed a new venture, AClarity Genomics, Inc.

Suspecting that Mr. West had misappropriated trade secrets and other confidential information to launch a competing business, BioSkryb filed suit. Among other claims, it alleged breach of Mr. West’s employment agreements and sought injunctive relief. Those agreements included one-year employee and customer non-solicitation covenants, as well as California choice-of-law provisions.

Mr. West countersued, invoking a relatively new and still underdeveloped provision of the California Business and Professions Code, Section 16600.5. (We previously wrote about Section 16600.5, here). The statute provides that an employer that attempts to enforce a contract containing an unlawful restraint on trade commits a civil violation and may be liable for damages and attorneys’ fees. BioSkryb did not dispute that, through its lawsuit, it had attempted to enforce the challenged restrictive covenants.

Following discovery, BioSkryb voluntarily dismissed its affirmative claims, leaving only Mr. West’s counterclaim under Section 16600.5. Mr. West then moved for summary judgment on liability (but not damages).

The dispositive issue became whether California law governed the employment agreements. Both parties conceded that, if California law applied, the restrictive covenants at issue were void. Mr. West sought to enforce the agreements’ express choice-of-law provision. BioSkryb, in contrast, argued that the provision should be disregarded because the agreements lacked a sufficient connection to California.

On June 8, 2026, the court sided with Mr. West in an order granting summary judgment. It identified several undisputed facts establishing a reasonable basis for the parties’ selection of California law:

  • BioSkryb had at one point considered relocating its headquarters from North Carolina to California;
  • Although the company ultimately remained in North Carolina, one of its co-founders relocated to California;
  • BioSkryb held in-person board meetings in California, retained California-based corporate counsel, and required Mr. West to travel to California frequently—at least twenty-five times in connection with his duties.

The court further held that applying California law would not contravene a fundamental policy of North Carolina—a finding that, if otherwise established, could override a valid choice-of-law provision. To the contrary, the court noted that North Carolina, like California, disfavors restrictive employment covenants.

The court also addressed the extraterritorial reach of Section 16600.5(d). BioSkryb argued that applying the statute in a North Carolina forum would violate the presumption against extraterritorial application of state law. The court rejected that contention, concluding—consistent with a recent federal decision from Arizona—that the statutory language unambiguously reflects the California legislature’s intent for Section 16600.5 to apply beyond California’s borders.

Takeaway:

BioSkryb underscores the growing risk that California’s antipathy to non-competes, particularly Section 16600.5, poses to employers nationwide. Where a contract contains a California choice-of-law provision, even limited contacts with the state may be sufficient to trigger application of California law. And critically, the act of attempting to enforce restrictive covenants in other jurisdictions may now expose employers to affirmative liability.

BioSkryb Genomics, Inc. v. AClarity Genomics Inc.

gavel in the dark background. law concept
Sasun Bughdaryan, Unsplash
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As part of Seyfarth’s 2026 Trade Secrets Webinar Series, our panel presented FTC Non-Compete Ban Two Years Later: Enforcement & Workarounds, examining how the non-compete landscape continues to evolve following the FTC’s abandoned rulemaking effort and the growing influence of state law.

Jesse Coleman, Gary Friedman, and Eron Reid led a practical discussion for in-house counsel, HR professionals, executives, and business leaders navigating an increasingly complex enforcement and compliance environment.

View the Recording – CLE credit for this recording expires on May 27, 2027. Please refer to the program description for jurisdiction-specific details and deadlines.

Key Takeaways

FTC Enforcement Has Shifted to a Case-by-Case Approach

Under new leadership, the FTC has moved away from attempting to impose a categorical ban on non-competes and instead is pursuing a case-by-case enforcement strategy. This approach applies a reasonableness standard similar to those long used by many states.

While the rulemaking effort may be behind us, federal scrutiny of restrictive covenants remains active—now focused on specific fact patterns rather than broad prohibitions.

Enforcement Is Targeting Overbroad Use of Non-Competes

Early enforcement actions indicate that the FTC is focusing on clear overuse and overreach, particularly where non-competes are:

  • Applied broadly across employee populations
  • Untethered to role, seniority, or access to sensitive information
  • Used as a default rather than a tailored protection

These actions reinforce that employers should avoid “one-size-fits-all” restrictions and instead ensure covenants are narrowly aligned to legitimate business interests.

Healthcare Remains a Key Area of Focus

The health care industry continues to be a priority for enforcement, particularly where restrictive covenants are perceived to limit patient choice or access to care.

Employers in this space should expect continued scrutiny of non-competes involving physicians and other clinical professionals, especially in highly competitive or underserved markets.

“Education Through Enforcement” Will Continue

The FTC is expected to continue leveraging targeted enforcement actions as a tool to shape the law, effectively providing guidance through test cases and settlements.

This “education through enforcement” approach means employers should closely monitor developments, as each action may further define the boundaries of acceptable restrictive covenant practices.

State Law Patchwork Is Expanding

At the same time, employers face an increasingly complex patchwork of state laws governing non-competes and other restrictive covenants. These laws vary significantly and may include:

  • Wage thresholds restricting enforceability
  • Advance notice requirements
  • Industry-specific limitations or outright bans

As a result, compliance must be managed on a jurisdiction-by-jurisdiction basis, with careful attention to applicable state requirements.

Uniform Agreements Are No Longer Sustainable

Given the divergence in state laws, multi-state employers can no longer rely on uniform agreements.

Instead, employers should consider:

  • Modular agreements that adjust based on employee location
  • State-specific templates tailored to local legal requirements

This approach helps balance enforceability with administrative efficiency while reducing legal risk.

Choice-of-Law Strategy Requires Reassessment

Employers should also re-evaluate whether to default to Delaware law when drafting restrictive covenants.

Although Delaware has traditionally been a preferred jurisdiction—particularly for companies incorporated there—its jurisprudence on restrictive covenants has shifted over the past several years and remains in flux.

Companies should:

  • Assess whether Delaware has a meaningful nexus to the employment relationship
  • Consider whether another jurisdiction tied to the workforce or business operations may provide a more reliable enforcement forum
  • Avoid reflexively selecting Delaware without evaluating current legal trends

Looking Ahead

Although the FTC’s non-compete rule is no longer in effect, the broader movement to limit restrictive covenants continues to gain momentum through both federal enforcement and state legislation. Employers should take a proactive approach by tailoring agreements, strengthening alternative protections, and staying attuned to ongoing legal developments.

To ensure you don’t miss future sessions, subscribe to our Litigation – Trade Secrets & Non-Competes mailing list. For tailored programs, our attorneys are available to present customized sessions for your organization. Subscribe to our Trading Secrets blog for ongoing insights on trade secrets, employee mobility, and information governance.