Protecting Trade Secrets without Noncompetition Agreements
Bad news for Illinois Employers: Illinois has adopted legislation which prohibits non-compete agreements with employees earning less than $70,000 per year. Amendments to the Illinois Freedom to Work Act (“The Act”) prohibit non-compete agreements for employees earning $75,000 per year or less and prohibits customer and co-worker non-solicit agreements for employees earning $45,000 per year or less. The Act defines a covenant not to compete as an employer/employee agreement that restricts one of the following: (1) any work for another employer for a specified period; (2) any work in a specified geographical area; or (3) work for another employer similar to an employee’s work for the employer included in the agreement.
These restrictions create obstacles for employers who want to protect their business Trade secrets which are important assets of a business. There are some options such as the Illinois Trade Secrets Act which protects information such as technical or non-technical data, a formula, pattern, compilation, program, device, method, technique, drawing, process, financial data, or list of actual or potential customers or suppliers, which:
- (1) is sufficiently secret to derive economic value, actual or potential, from not being generally known to other persons who can obtain economic value from its disclosure or use; and
- (2) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy or confidentiality.
In essence a Trade Secret is confidential information not generally known or easily discoverable by others which provide businesses with a competitive advantage.
Prior to the 2022 Amendments Illinois business owners had almost exclusively relied on noncompete agreements with their employees and contractors to protect their trade secrets and other intellectual property, including customer lists. The Illinois Amendment changes that protection. And, to make matters more difficult, the Federal Trade Commission recently announced a proposed nationwide rule prohibiting noncompete clauses with workers.
As experienced Chicago Business Lawyers, we are aware of several options for employers’ to protect their Trade Secrets with the new restrictions. There are several possible alternatives available to Illinois Business Owners:
Nondisclosure agreements: Employers can ask employees or contractors to keep specific information confidential and restrict any disclosure to others.
“Limited” noncompete agreements: With these agreements employees are required to inform the employer if they start to work with a competitor within a certain number of years. Employers desiring to protect their Trade Secrets then notifies the new employer of the former employees’ ongoing confidentiality obligations.
Defend Trade Secrets Act (DTSA): The DTSA gives employers the right to sue in federal court for misappropriation of a Trade Secret.
Encryption or other security measures: Employers should keep their Trade Secrets, including their customer list, locked up with limited access.
Protecting your business trade secrets is an important part of protecting assets of a business. It should not be overlooked. Start by taking stock of your business Trade Secrets and taking measures to protect those assets. Consult with experienced business lawyers like the Chicago Business Lawyers at Bellas & Wachowski to help adopt a business strategy to protect those important assets. Contact George “Geo” Bellas at George@Bellas-Wachowski.com to schedule an appointment to discuss the particular needs of your business.