Protecting Your Business When an Employee Leaves: Non-Sol…

Most small business owners don’t think about post-employment protections until after someone has left. A key employee joins a competitor, starts their own competing business, or takes your client list, and you’re left wondering whether you have any recourse.

Your legal leverage after an employee leaves depends on the agreements and protections you put in place before they leave.

This guide covers how we think about non-competes (including why we usually do not recommend them for most situations), what non-solicitation agreements actually protect, how trade secret law works, and the steps worth taking when you hire, not after someone leaves.

Our Honest Take on Non-Compete Agreements

We generally discourage non-compete agreements for most small businesses, and current legal trends reinforce that approach.

Non-competes are falling out of favor nationally. Several states have banned them. Federal regulatory attention has increased. And in a competitive hiring market, good candidates with options will choose an employer who doesn’t require one. A non-compete restricts someone’s ability to earn a living in their field. That’s a meaningful ask that costs you hires.

We recommend non-solicitation agreements combined with strong confidentiality provisions instead. These protect what actually matters, your client relationships and proprietary information, without restricting the employee’s general ability to work.

Non-Compete Law: What It Actually Says

Non-compete enforceability is highly state-specific. The same agreement can be enforceable in one state and weak or unenforceable in another.

Most states evaluate the same core points:

• Whether there is a valid underlying agreement and legitimate business interest
• Whether the time limit is reasonable
• Whether the geographic scope is reasonable
• Whether the restricted activities are narrowly tailored to the worker’s actual role

Overbroad language often triggers litigation and judicial narrowing. Narrow, targeted restrictions are usually more defensible.

What We Recommend Instead: Non-Solicitation + Confidentiality

A non-solicitation agreement prevents a departing employee from directly soliciting your clients or employees, not from working in your industry generally. It’s narrower, more defensible, and less likely to deter qualified candidates.

Paired with a strong confidentiality agreement, a non-solicitation clause protects the things that actually matter:

Client relationships. A non-solicitation clause prevents a departing salesperson or account manager from calling your clients and inviting them to follow. They can go work for a competitor, they just can’t actively poach your accounts using access they had while employed by you.

Confidential information. A confidentiality agreement prevents the employee from using or disclosing your proprietary information, pricing, processes, client data, trade secrets, after they leave.

This combination accomplishes what most businesses actually need without the enforceability risk and candidate friction that non-competes carry.

Trade Secrets: Protection Without a Non-Compete

Trade secret law can protect your business even when a non-compete is limited or unavailable. The key is proving that the information has economic value and that you used reasonable steps to keep it confidential.

Examples may include client lists with pricing and relationship history, internal playbooks, and proprietary methods.

Reasonable steps usually include access controls, signed confidentiality agreements, clear confidentiality markings, and exit controls.

Defend Trade Secrets Act (DTSA)

The federal Defend Trade Secrets Act (DTSA) provides an additional path for pursuing trade secret theft in federal court in qualifying cases.

Putting Protections in Place at Hiring

For employees: Include confidentiality and non-solicitation provisions in an agreement signed before they have access to sensitive information. If you include a non-compete, structure it to satisfy your state’s enforceability requirements and tie it to legitimate business interests such as confidential information or specialized training.

For independent contractors: Include these provisions in your IC agreement. Restrictive-covenant rules can apply to contractors as well. The same enforceability requirements apply, and the same candidate-friction risk exists.

For departing partners or co-founders: A partner departure requires tailored post-departure restrictions drafted for the specific situation. The transfer or buyout agreement is where these belong.

When an Employee or Contractor Has Already Left

Do you have an enforceable agreement? Review what they signed and whether it meets applicable state-law requirements for restrictive covenants, or whether you have a non-solicitation and confidentiality provision.

Are they soliciting your specific clients, or just competing generally? Competing is generally legal. Using your confidential information to take your relationships is not.

Did they take company property? Photos, branded materials, client data, these are IP and trade secret issues regardless of what they signed. A cease and desist is the first step.

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