Are employee non-compete agreements enforceable in South Carolina?
Yes, sometimes. South Carolina has no general non-compete statute, so enforceability turns on common law: a covenant is upheld only if it is necessary to protect a legitimate interest, reasonably limited in time and place, not unduly harsh on the employee, reasonable as a matter of public policy, and supported by valuable consideration. On a touch screen, a tap shows all 2 sources in this group.
Because a non-compete is a restraint on trade that is against public policy, South Carolina courts disfavor these covenants . The reasonableness analysis is rooted in Standard Register Co. v. Kerrigan and is applied today as a conjunctive list — every one of the five elements must be met or the covenant fails .
A South Carolina covenant that clears four of the five conjunctive factors but not the fifth, such as a restraint signed without valuable consideration or one broader in time and place than the employer's legitimate interest requires, risks being unenforceable . Recitals and scope terms that establish only the employer's interest leave the harshness, public-policy, and consideration factors unaddressed, and a restraint on trade that does not meet the criteria is unenforceable .
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Team IA states South Carolina's five-factor reasonableness test for enforcing a covenant not to compete.
A covenant not to compete will be upheld only if it is: (1) necessary for the protection of the legitimate interest of the employer; (2) reasonably limited in its operation with respect to time and place; (3) not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood; (4) reasonable from the standpoint of sound public policy; and (5) supported by valuable consideration.
See Team IA, Inc. v. Lucas, 395 S.C. 237, 717 S.E.2d 103 (Ct. App. 2011).
Kerrigan explains that non-competes are restraints of trade against public policy and are therefore unenforceable unless they meet the reasonableness criteria.
The reason that contracts against competition are held to be unenforceable unless they meet certain criteria, is that they constitute a restraint upon trade which is against public policy.
See Standard Register Co. v. Kerrigan, 238 S.C. 54, 119 S.E.2d 533 (1961).
What legitimate business interests can support a South Carolina non-compete?
The core interest that justifies a non-compete is the employer's customer relationships and goodwill. South Carolina separately enforces covenants protecting an employer's contractual relationships with its own employees, and it protects trade secrets by statute independent of any covenant. On a touch screen, a tap shows all 3 sources in this group.
A restraint is reasonable when it is designed to protect the employer against the loss of customers the employee could divert; protecting against ordinary competition, untethered to such an interest, is not enough . South Carolina also recognizes an employer's interest in its relationships with its own employees: in Oxman v. Sherman, the court read a covenant as barring inducement of other employees to breach their contracts rather than as a blanket bar on hiring .
Trade secrets are protected by statute independent of any covenant. Under the South Carolina Trade Secrets Act, every employee who knows of an employer's trade secret has a duty to refrain from using or disclosing it, separate from and in addition to any written agreement . That statutory protection endures until the secret is disclosed or discovered by proper means .
Information the South Carolina Trade Secrets Act already covers does not need a non-compete to protect it. A focused confidentiality and trade-secret strategy reaches misappropriation without the strict-construction risk that attaches to a covenant not to compete. On a touch screen, a tap shows all 2 sources in this group.
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Kerrigan supports protecting the employer against the loss of its customers as the legitimate interest that can justify a restraint.
A restrictive covenant, therefore, is reasonable if it is designed to protect the employer against loss of his customers.
See Standard Register Co. v. Kerrigan, 238 S.C. 54, 119 S.E.2d 533 (1961).
Oxman supports protecting the employer's contractual relationships with its employees by barring inducement to breach, rather than a blanket no-hire.
We construe the first covenant mentioned as restraining appellant from seeking to induce any of respondents' employees to breach their contract of employment and not as preventing him from seeking the services of such employees so long as there is no interference with their contractual relations with respondents.
See Oxman v. Sherman, 239 S.C. 218, 122 S.E.2d 559 (1961).
Section 39-8-30 imposes a statutory duty on employees to refrain from using or disclosing an employer's trade secret independently of any contract.
Every employee who is informed of or should reasonably have known from the circumstances of the existence of any employer's trade secret has a duty to refrain from using or disclosing the trade secret without the employer's permission independently of and in addition to any written contract of employment, secrecy agreement, noncompete agreement, nondisclosure agreement, or other agreement between the employer and the employee.
See S.C. Code Ann. § 39-8-30(B).
Section 39-8-30 provides that trade-secret protection endures until the secret is disclosed or discovered by proper means.
A trade secret endures and is protectable and enforceable until it is disclosed or discovered by proper means.
See S.C. Code Ann. § 39-8-30(A).
How narrow must a customer non-solicitation covenant be in South Carolina?
It must be tied to the customers the employee actually dealt with. South Carolina enforces a customer non-solicitation covenant limited to customers the employee had contact with during a defined look-back period — and such a limit can even substitute for a geographic restriction — but a covenant barring solicitation of every customer on the employer's books advances no legitimate interest and is unenforceable. On a touch screen, a tap shows all 2 sources in this group.
Federal courts applying South Carolina law draw the line at the employee's own customer relationships. In Vessel Medical, Inc. v. Elliott, the District of South Carolina upheld a non-solicitation covenant precisely because it reached only customers the employee had contact with during his last twelve months of employment . By contrast, Fournil v. Turbeville Insurance Agency, Inc. refused to enforce a covenant that also barred soliciting customers the employee had never serviced, because prohibiting those contacts protected no legitimate interest of the employer . The governing principle is that an employer may protect its customer relationships but may not enforce a covenant that simply prevents ordinary competition .
A customer non-solicit that reaches beyond the Covered Customers the employee had material contact with during the look-back period risks being unenforceable, because barring contact with customers the employee never serviced protects no legitimate interest . The optional no-business covenant carries the same risk: a Covered Customers definition loosened beyond the customers the employee served risks the covenant being treated as a bar on ordinary competition .
Sources for this answer
Vessel Medical upheld a customer non-solicitation covenant because it was limited to customers the employee had contact with during his last twelve months of employment.
Here, Elliott is restricted from soliciting customers with whom he had contact during his last 12 months of employment and such covenants have withstood overbreadth challenges.
See Vessel Med., Inc. v. Elliott, No. 6:15-cv-00330-MGL, 2015 U.S. Dist. LEXIS 122436 (D.S.C. Sept. 15, 2015).
Fournil held that prohibiting an employee from soliciting customers she had never serviced was not related to any legitimate interest of the employer.
The magistrate found that prohibiting such contacts was not related to any legitimate interest of Turbeville, and this conclusion was well-founded.
See Fournil v. Turbeville Ins. Agency, Inc., No. 3:07-cv-03836-JFA (D.S.C. Mar. 2, 2009).
Fournil held that an employer may not enforce a covenant that prevents ordinary competition rather than protecting a legitimate interest.
An employer is not, however, entitled to enforce an agreement preventing ordinary competition.
See Fournil v. Turbeville Ins. Agency, Inc., No. 3:07-cv-03836-JFA (D.S.C. Mar. 2, 2009).
Is continued at-will employment enough consideration for a South Carolina non-compete?
Not by itself. When a covenant is signed after employment has already begun, South Carolina requires separate, independent consideration — continued at-will employment alone is not enough .
Poole v. Incentives Unlimited, Inc. is the controlling rule. The court held that a covenant entered after the inception of employment needs new consideration beyond the continuation of at-will work . In Poole itself, the employee's duties, position, and salary were left unchanged after she signed, so there was nothing to supply that separate consideration .
Where the employee signs after employment has already begun, the covenant needs a Separate Consideration cover term — a raise, bonus, promotion, or change in status — because continued employment alone will not support it. South Carolina requires it: a covenant entered into after the inception of employment needs separate consideration beyond continued at-will employment , and an unchanged role supplies none — in Poole the employee's duties, position, and salary were left unchanged . Consideration establishes only one of the five factors: a well-documented raise does nothing for a covenant that fails on legitimate interest, time and place, harshness, or public policy.
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Poole holds that a covenant signed after employment begins requires separate consideration beyond continued at-will employment.
Therefore, we adopt the rule that when a covenant is entered into after the inception of employment, separate consideration, in addition to continued at-will employment, is necessary in order for the covenant to be enforceable.
See Poole v. Incentives Unlimited, Inc., 345 S.C. 378, 548 S.E.2d 207 (2001).
Poole found no separate consideration where the employee's duties, position, and salary were unchanged after signing.
In the instant case, Poole's duties, position, and salary were left unchanged.
See Poole v. Incentives Unlimited, Inc., 345 S.C. 378, 548 S.E.2d 207 (2001).
What duration and geographic scope are reasonable for a South Carolina non-compete?
There is no statutory cap; reasonableness is judged on the facts. The territory may be no broader than necessary to protect the employer's legitimate interest, and both time and place must independently be reasonably limited. On a touch screen, a tap shows all 2 sources in this group.
Geography is tied to the employer's actual customer base. A territorial restriction is unreasonable when it sweeps in an area broader than necessary to protect the legitimate interest of the employer . Because the test is conjunctive, each of time and place must be reasonable on its own; as a practical matter, a wide territory paired with a long duration is harder to defend than a restraint matched to where the employee actually worked and the customers the employee actually served .
A non-compete's duration, territory, and step-down alternatives hold up only where they fit the employee's actual role and the employer's actual market — a radius or term imported from another state's form is measured against a market it was never sized to. A territorial scope is unreasonable if it covers an area broader than necessary to protect the employer's legitimate interest , and time and place must each be reasonably limited under the conjunctive test . The optional non-investment covenant is judged the same way — a post-employment restraint under the five factors; its passive-public-holdings carveout leaves ordinary public-market investing open, so its real bite is active or material ownership in private competitors. No South Carolina court will shrink an overdrawn map afterward.
Sources for this answer
Kerrigan holds that a territorial scope is unreasonable if it covers an area broader than necessary to protect the employer's legitimate interest.
Stated negatively, the territorial scope renders the restraint unreasonable if it covers an area broader than necessary to protect the legitimate interest of the employer.
See Standard Register Co. v. Kerrigan, 238 S.C. 54, 119 S.E.2d 533 (1961).
Team IA's conjunctive five-factor test requires time and place to be reasonably limited as part of the overall reasonableness inquiry.
A covenant not to compete will be upheld only if it is: (1) necessary for the protection of the legitimate interest of the employer; (2) reasonably limited in its operation with respect to time and place; (3) not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood; (4) reasonable from the standpoint of sound public policy; and (5) supported by valuable consideration.
See Team IA, Inc. v. Lucas, 395 S.C. 237, 717 S.E.2d 103 (Ct. App. 2011).
Will a South Carolina court blue-pencil or narrow an overbroad non-compete?
No. South Carolina is a strict no-blue-pencil, no-reformation jurisdiction: a court will not rewrite an unreasonable covenant, and the agreement must stand or fall on its own terms. On a touch screen, a tap shows all 2 sources in this group.
In Poynter Investments, Inc. v. Century Builders of Piedmont, Inc., the South Carolina Supreme Court held that the restrictions in a non-compete cannot be rewritten by a court or limited by the parties' later agreement, but must stand or fall on their own terms . The court reversed an order that had purported to enforce the covenant on narrower terms than the parties wrote . Stonhard, Inc. v. Carolina Flooring Specialists, Inc. refused to supply a missing territorial limitation, reasoning that adding a term the parties never negotiated would itself violate public policy .
There is one narrow lever: an alternative, already-drafted fallback. In Team IA, Inc. v. Lucas, the Court of Appeals indicated that a narrower alternative territory written into the original agreement could remain enforceable even when the primary territory was overbroad — because the court would be enforcing language the parties actually agreed to, not inventing it . For a clause-by-clause pass over a specific agreement against these drafting rules, the South Carolina non-compete reviewer checklist walks the full covenant suite item by item with each requirement's force level.
Reformation, severability, and step-down provisions do their work only as real, agreed step-down text, not as a savings clause asking a court to trim an overbroad restraint. South Carolina will not do the trimming: the restrictions in a non-compete cannot be rewritten by a court or limited by the parties' later agreement but must stand or fall on their own terms , and a contract may not be reformed or blue-penciled to add a new term the parties never agreed to — an overbroad covenant fails whole, and an unenforceable restraint supports no injunction. The one lever that survives is text the parties actually wrote: an alternative narrower restriction in the original agreement can remain enforceable even when the primary one is overbroad . Step-down duration and territory drafted into the agreement as genuine agreed alternatives, with each covenant self-contained, give the agreement that fallback — a sound non-solicit can outlive a non-compete that fails the test.
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Poynter holds that South Carolina courts cannot rewrite a non-compete's restrictions, which must stand or fall on their own terms.
These cases stand for the proposition that, in South Carolina, the restrictions in a non-compete clause cannot be rewritten by a court or limited by the parties' agreement, but must stand or fall on their own terms.
See Poynter Invs., Inc. v. Century Builders of Piedmont, Inc., 387 S.C. 583, 694 S.E.2d 15 (2010).
Poynter reversed an order that enforced the non-compete on terms other than those the parties agreed upon.
We reverse the order which purports to enforce a non-competition agreement on terms other than those agreed upon by the parties.
See Poynter Invs., Inc. v. Century Builders of Piedmont, Inc., 387 S.C. 583, 694 S.E.2d 15 (2010).
Stonhard holds that a covenant may not be reformed or blue-penciled to add a new term the parties never agreed to.
We hold, therefore, that the contract may not be reformed or blue-penciled so as to add an entirely new term to which neither of the parties agreed.
See Stonhard, Inc. v. Carolina Flooring Specialists, Inc., 366 S.C. 156, 621 S.E.2d 352 (2005).
Team IA indicates an alternative, narrower territory written into the original agreement can remain enforceable even when the primary territory is overbroad.
However, we conclude the alternative territorial restriction contained in the parties' original agreement (South Carolina, North Carolina, Georgia, and Alabama) would remain valid and enforceable to the extent it is not overly broad after further development of the facts.
See Team IA, Inc. v. Lucas, 395 S.C. 237, 717 S.E.2d 103 (Ct. App. 2011).
Are confidentiality and nondisclosure agreements treated like non-competes in South Carolina?
It depends on how broad they are. A genuine confidentiality or invention-assignment clause is not a restraint of trade and is not strictly construed against the employee — but an NDA that operates like a non-compete is judged like one. On a touch screen, a tap shows all 2 sources in this group.
In Milliken & Co. v. Morin, the South Carolina Supreme Court held that confidentiality and invention-assignment clauses are not in restraint of trade and should not be strictly construed in favor of the employee . Even so, those agreements are still restrictive covenants whose scope is subject to judicial review for reasonableness .
The line matters because a sweeping NDA can collapse into a functional non-compete. In Fay v. Total Quality Logistics, LLC, nondisclosure provisions that had the effect of a covenant not to compete required a reasonable time restriction like any other non-compete . Because those provisions operated as non-competes with no reasonable time limit, they violated South Carolina public policy .
Non-trade-secret Confidential Information given a finite duration, with the employee's general knowledge, skill, and experience carved out of the definition, stays a genuine confidentiality clause. Run open-ended, it can collapse into a functional non-compete: a nondisclosure provision with the effect of a covenant not to compete requires a reasonable time restriction , and untimed provisions operating that way violated South Carolina public policy , whereas a genuine confidentiality clause scoped to protectable information is not a restraint of trade at all . An Other Confidential Information Duration stretched toward forever converts the clause into an untimed functional non-compete.
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Milliken holds confidentiality and invention-assignment clauses are not in restraint of trade and are not strictly construed in favor of the employee.
We therefore hold confidentiality and invention assignment clauses are not in restraint of trade and should not be strictly construed in favor of the employee.
See Milliken & Co. v. Morin, 399 S.C. 23, 731 S.E.2d 288 (2012).
Milliken holds that confidentiality and invention-assignment agreements remain restrictive covenants subject to judicial review for reasonableness.
Nevertheless, these agreements are still restrictive covenants and public policy demands their scope be subject to judicial review for reasonableness.
See Milliken & Co. v. Morin, 399 S.C. 23, 731 S.E.2d 288 (2012).
Fay holds that nondisclosure provisions that operate as a covenant not to compete require a reasonable time restriction like any non-compete.
Because the nondisclosure provisions had the effect of a covenant not to compete, they required a reasonable time restriction like any other noncompete agreement.
See Fay v. Total Quality Logistics, LLC, 419 S.C. 622, 799 S.E.2d 318 (Ct. App. 2017).
Fay held that NDA provisions operating as non-competes with no reasonable time restriction violated South Carolina public policy.
The nondisclosure provisions in paragraphs four and six operated as noncompete provisions with no reasonable time restriction, which violated the public policy of South Carolina.
See Fay v. Total Quality Logistics, LLC, 419 S.C. 622, 799 S.E.2d 318 (Ct. App. 2017).
Does South Carolina treat sale-of-business non-competes differently?
Yes. A covenant tied to the sale of a business is scrutinized at a more relaxed level than an employment covenant, so broader restraints may be easier to defend .
In Palmetto Mortuary Transport, Inc. v. Knight Systems, Inc., the South Carolina Supreme Court applied this relaxed standard to a covenant executed with an asset purchase . Reviewing the restraint under that standard, the court upheld the territorial restriction as reasonable and enforceable . The rationale is that a buyer is paying for goodwill, and the seller bargained for the price that the covenant helps protect .
A sale-of-business covenant routed through this employment form loses the relaxed review that helps sale covenants — that review exists only because the covenant is part of a business sale. Covenants executed in conjunction with the sale of a business are scrutinized at a more relaxed level than covenants executed in conjunction with employment contracts , and under that standard the sale-related territorial restriction in Palmetto Mortuary was upheld as reasonable and enforceable . That forgiving framework does not travel to a covenant a worker signs to keep or take a job. A genuine sale covenant belongs in the transaction documents — given by the seller and supported by transaction consideration; run through this employment form, it risks forfeiting the more favorable review.
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Palmetto Mortuary holds that sale-of-business non-competes are scrutinized more leniently than employment non-competes.
Non-compete covenants executed in conjunction with the sale of a business should be scrutinized at a more relaxed level than non-compete covenants executed in conjunction with employment contracts.
See Palmetto Mortuary Transp., Inc. v. Knight Sys., Inc., 424 S.C. 444, 818 S.E.2d 724 (2018).
Palmetto Mortuary upheld the territorial restriction of the sale-related covenant as reasonable and enforceable.
We hold the territorial restriction of the non-compete covenant is reasonable and enforceable, and we hold Knight's additional sustaining grounds are without merit.
See Palmetto Mortuary Transp., Inc. v. Knight Sys., Inc., 424 S.C. 444, 818 S.E.2d 724 (2018).
Does a South Carolina non-compete toll or extend during breach or litigation?
South Carolina law points against it. In Stonhard, the Supreme Court held that extending a covenant's time period beyond its stated expiration would be against public policy, and no South Carolina decision endorses automatic judicial tolling during a breach. On a touch screen, a tap shows all 2 sources in this group.
The closest authority is Stonhard, Inc. v. Carolina Flooring Specialists, Inc., which reasoned that judicially extending the restrained period would be arbitrary and would let a court disrupt the parties' private right to contract . That reflects the same strict-construction instinct behind South Carolina's no-reformation rule: a court will hold the parties to the period they wrote rather than lengthen it.
A contractual tolling clause — language in the agreement that pauses the clock during a breach — is a different question that no surveyed South Carolina case squarely decides. Any such clause still has to satisfy the five-factor reasonableness test, and a clause that converts a fixed restraint into an open-ended one invites the same public-policy objection Stonhard raised .
A Restricted Period stated as a fixed, definite term that expires on its stated end date, with no tolling bolted on to extend it, matches where South Carolina points: extending a covenant's time period past its stated expiration would be against public policy, because it would be arbitrary and would let a court disrupt the parties' private right to contract , and no South Carolina decision endorses automatic judicial tolling during a breach. A pause-the-clock term drafted as a separate, reasonable term tied to the actual duration of the breach still has to satisfy the reasonably-limited-in-time factor ; an open-ended or indefinite extension does not.
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Stonhard holds that extending a covenant's time period beyond its stated expiration would be against public policy.
Accordingly, any extension of the time period would be against public policy, because it would be arbitrary and set precedent allowing a court to disrupt a party's private right to contract.
See Stonhard, Inc. v. Carolina Flooring Specialists, Inc., 366 S.C. 156, 621 S.E.2d 352 (2005).
Team IA's reasonableness test governs any restraint, including one extended by a tolling clause, which must remain reasonably limited in time.
A covenant not to compete will be upheld only if it is: (1) necessary for the protection of the legitimate interest of the employer; (2) reasonably limited in its operation with respect to time and place; (3) not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood; (4) reasonable from the standpoint of sound public policy; and (5) supported by valuable consideration.
See Team IA, Inc. v. Lucas, 395 S.C. 237, 717 S.E.2d 103 (Ct. App. 2011).
Are physician and healthcare non-competes enforceable in South Carolina?
For now, yes, under the same common-law test — South Carolina has no enacted physician-specific ban, though a bill to void physician non-competes passed the House in 2026 and is pending in the Senate. On a touch screen, a tap shows all 2 sources in this group.
A physician non-compete is currently analyzed under the ordinary five-factor reasonableness test, with the public-interest factor — patient access to care — as a likely pressure point . That could change. H.4767, the Physician Noncompete Contract Prohibition Act, would add a new chapter declaring that contracts with physicians containing noncompete clauses are against South Carolina public policy . As of this review the bill had passed the House and received a favorable Senate committee report, but it had not been enacted.
The bill is physician-specific — not a general healthcare-worker ban — and it is not an absolute prohibition. It would still let an employer recoup documented relocation, signing, retention, and training costs from a physician who leaves within a set period, and it preserves the employer's ability to protect trade secrets and confidential information; its limits would apply only to contracts or renewals entered on or after its effective date .
South Carolina has no enacted physician statute, so a covenant restraining the practice of medicine is reviewed under the ordinary five-factor test, with patient access to care the likely pressure point on the sound-public-policy factor . For a physician hire, a narrow radius and a short term preserve patient access and continuity of care, and the deal prices against H.4767: the pending Physician Noncompete Contract Prohibition Act would declare physician noncompete clauses against the public policy of the State, and as of this review it had passed the House and drawn a favorable Senate committee report without being enacted . A covenant drafted as if the bill had already become law overreaches the current rule, and the bill's status can move before signing.
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H.4767, a bill pending in the South Carolina Senate, would declare physician noncompete clauses against the public policy of the State.
Contracts with physicians containing noncompete clauses are considered interference with the establishment or maintenance of a patient's choice of physician and are against the public policy of the State of South Carolina.
See H.4767, 126th Gen. Assemb., Reg. Sess. (S.C. 2026) (passed House Mar. 26, 2026; favorable Senate committee report May 5, 2026; not enacted).
Team IA's five-factor test, including the sound-public-policy factor, governs physician non-competes absent a physician-specific statute.
A covenant not to compete will be upheld only if it is: (1) necessary for the protection of the legitimate interest of the employer; (2) reasonably limited in its operation with respect to time and place; (3) not unduly harsh and oppressive in curtailing the legitimate efforts of the employee to earn a livelihood; (4) reasonable from the standpoint of sound public policy; and (5) supported by valuable consideration.
See Team IA, Inc. v. Lucas, 395 S.C. 237, 717 S.E.2d 103 (Ct. App. 2011).
Did the FTC's federal non-compete rule change South Carolina non-compete law?
No. The FTC's 2024 nationwide Non-Compete Rule was set aside by a federal court before it took effect, so South Carolina non-competes remain governed by South Carolina common law .
Ryan LLC v. Federal Trade Commission held that the FTC lacked statutory authority to issue the rule and that the rule was arbitrary and capricious . The court set the rule aside and held it would not be enforced or take effect . That removes the federal rule as a nationwide overlay but does not make any particular South Carolina covenant enforceable — the common-law reasonableness test still controls.
Sources for this answer
Ryan set aside the FTC Non-Compete Rule and held it would not take effect.
The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter.
See Ryan LLC v. Fed. Trade Comm'n, 746 F. Supp. 3d 369 (N.D. Tex. 2024).
Ryan held the FTC lacked statutory authority to promulgate the rule and that the rule was arbitrary and capricious.
In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non- Compete Rule, and that the Rule is arbitrary and capricious.
See Ryan LLC v. Fed. Trade Comm'n, 746 F. Supp. 3d 369 (N.D. Tex. 2024).
What does federal law require a non-compete or confidentiality agreement in South Carolina to say about whistleblowers and pay?
An employee confidentiality, non-compete, or invention assignment agreement signed or updated now that governs trade secrets or other confidential information must give the Defend Trade Secrets Act whistleblower-immunity notice, and for employees the National Labor Relations Act covers, Section 7 of that Act protects concerted activity, including joining together over pay and working conditions, that a broad confidentiality clause can restrict. The employer may satisfy the notice duty by cross-referencing a qualifying policy document provided to the employee, but an employer that omits the notice may not be awarded exemplary damages or attorney fees under the Defend Trade Secrets Act in an action against an employee who was not given notice.
The notice describes a federal immunity: an individual cannot be held liable under federal or state trade-secret law for disclosing a trade secret in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or in a court filing made under seal. For an agreement signed or updated now, the duty to give that notice reaches any agreement with an employee that governs trade secrets or other confidential information, whatever else the agreement does.
Section 7 gives employees the National Labor Relations Act covers a statutory right to engage in concerted activity for mutual aid or protection, including joining together to improve pay and working conditions. For employees the Act covers, the Board's work-rule standard adopted in 2023 makes a rule presumptively unlawful if it has a reasonable tendency to chill employees from exercising their Section 7 rights; an employer can rebut that presumption only by showing a legitimate and substantial business interest it cannot serve with a more narrowly tailored rule. The 2023 standard may change, but the Section 7 right it enforces is statutory. State law may add its own requirements for the same clauses.
A form carried over without the immunity notice, or a cross-reference to a reporting policy the employee never received, leaves the confidentiality clause without a valid notice, so the Act's exemplary damages and attorney fees are unavailable against that employee. A Confidential Information definition that sweeps in pay and working conditions with no carve-out exposes the employer to an unfair-labor-practice finding for employees the Act covers.
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An individual is immune from criminal and civil liability under federal and state trade-secret law for disclosing a trade secret in confidence to a government official or an attorney solely to report or investigate a suspected violation of law, or in a court filing made under seal.
An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that— (A) is made— (i) in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (B) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
See 18 U.S.C. § 1833(b)(1).
An employer must give notice of the trade-secret whistleblower immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
See 18 U.S.C. § 1833(b)(3)(A).
An employer complies with the notice requirement by cross-referencing a policy document, provided to the employee, that sets out the employer's reporting policy for a suspected violation of law.
An employer shall be considered to be in compliance with the notice requirement in subparagraph (A) if the employer provides a cross-reference to a policy document provided to the employee that sets forth the employer's reporting policy for a suspected violation of law.
See 18 U.S.C. § 1833(b)(3)(B).
An employer that does not give the required notice may not be awarded exemplary damages or attorney fees in a trade-secret action against an employee who did not receive it.
If an employer does not comply with the notice requirement in subparagraph (A), the employer may not be awarded exemplary damages or attorney fees under subparagraph (C) or (D) of section 1836(b)(3) in an action against an employee to whom notice was not provided.
See 18 U.S.C. § 1833(b)(3)(C).
Section 7 gives employees the right to engage in concerted activities for mutual aid or protection, the statutory basis for keeping discussion of pay and working conditions outside confidentiality restrictions.
Employees shall have the right to self-organization, to form, join, or assist labor organizations, to bargain collectively through representatives of their own choosing, and to engage in other concerted activities for the purpose of collective bargaining or other mutual aid or protection, and shall also have the right to refrain from any or all of such activities except to the extent that such right may be affected by an agreement requiring membership in a labor organization as a condition of employment as authorized in section 158(a)(3) of this title.
See 29 U.S.C. § 157 (NLRA § 7).
The National Labor Relations Board protects the right of private-sector employees, with or without a union, to join together to improve wages, benefits, and working conditions.
Established in 1935, the National Labor Relations Board is an independent federal agency that protects employees from unfair labor practices and protects the right of private sector employees to join together, with or without a union, to improve wages, benefits and working conditions.
See NLRB Office of Public Affairs, news release of Feb. 21, 2023 (agency mission statement).
Under the work-rule standard the Board adopted in 2023, a rule with a reasonable tendency to chill employees from exercising their Section 7 rights is presumptively unlawful unless the employer proves a legitimate and substantial business interest it cannot advance with a more narrowly tailored rule.
Under the new standard adopted in Stericycle, the General Counsel must prove that a challenged rule has a reasonable tendency to chill employees from exercising their rights. If the General Counsel does so, then the rule is presumptively unlawful. However, the employer may rebut the presumption by proving that the rule advances a legitimate and substantial business interest and that the employer is unable to advance that interest with a more narrowly tailored rule.
See Stericycle, Inc., 372 NLRB No. 113 (2023); NLRB Office of Public Affairs, Board Adopts New Standard for Assessing Lawfulness of Work Rules (Aug. 2, 2023).