How to Respond to Trade Secret and Noncompete Demand Letters
Employee defense strategies for trade secret theft allegations, noncompete enforcement, and nonsolicitation claims

When a former employer sends a demand letter alleging trade secret misappropriation, noncompete violations, or client poaching, employees face serious legal and career consequences. These claims often seek injunctive relief (prohibiting you from working or contacting clients), monetary damages, and attorney fees, making strategic response critical.

This guide explains how to evaluate trade secret and restrictive covenant claims, identify defenses (especially under California's strong employee protections), and draft responses that protect your ability to work while minimizing litigation risk. Understanding your rights is essential when facing employer demands.

✍️ Need to Send a Trade Secret or Non-Compete Demand Letter? If a former employee has violated their agreements, see my guide on How to Write Trade Secret Demand Letters →
Initial assessment: Understanding the claims against you
Common allegations in employer demand letters
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Trade secret misappropriation
Taking confidential information (customer lists, pricing, formulas, source code) and using it to benefit new employer or yourself (CUTSA, DTSA).
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Noncompete violation
Working for competitor or starting competing business in violation of noncompete agreement (generally unenforceable in California).
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Nonsolicitation breach
Soliciting former employer's customers or employees in violation of nonsolicitation agreement (narrow enforceability in California).
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Breach of confidentiality
Disclosing or using confidential business information in violation of NDA or employment agreement.
Immediate steps upon receiving demand letter
  • Do not delete anything: Preserve all emails, texts, files, documents. Spoliation of evidence creates separate liability and adverse inference.
  • Do not admit anything: Do not respond to employer directly. Admissions can be used against you in litigation.
  • Notify new employer (if applicable): Alert new employer to demand letter. They may provide indemnification or legal support.
  • Consult employment attorney immediately: Trade secret and restrictive covenant law is complex and state-specific. Retain counsel within 5-7 days.
    • Injunction risk: Employer may seek temporary restraining order (TRO) or preliminary injunction to stop you from working, contacting clients, or using information. TRO hearing can occur within days. Immediate attorney consultation is critical.
    Key questions to evaluate
    • Did I take confidential information? Review what documents, files, or data you have from former employer. Determine if truly confidential/trade secret.
    • Did I sign restrictive covenants? Locate employment agreement, offer letter, NDA, noncompete. Read exact language of restrictions.
    • What state law governs? California has strong employee protections (noncompetes generally void). Other states enforce restrictive covenants more readily.
    • Am I actually violating restrictions? Are you competing, soliciting clients, or using trade secrets? Or is employer making baseless accusations?
    California employee protections: Why noncompetes are usually unenforceable
    Business & Professions Code § 16600: Noncompete ban

    California law provides: "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

    This statute renders most noncompete agreements unenforceable in California, even if you signed the agreement willingly and were paid consideration.

    Strong employee protection: California courts broadly interpret § 16600 to protect employee mobility. Even narrow noncompetes (limited geographic scope, short duration) are generally void. Only narrow exceptions exist (sale of business, dissolution of partnership).
    What IS enforceable in California?
    Restriction Type Enforceability in California
    Noncompete (general) ❌ VOID under B&P Code § 16600. Cannot prohibit working for competitor.
    Nonsolicitation (customers) ⚠️ LIMITED. Enforceable only if narrowly tailored to protect trade secrets, not mere client relationships (Edwards v. Arthur Andersen).
    Nonsolicitation (employees) ⚠️ LIMITED. Generally unenforceable as restraint on trade unless protects legitimate trade secret.
    Confidentiality / NDA ✓ ENFORCEABLE. Must protect actual trade secrets, not general knowledge or publicly available information.
    Trade secret protection ✓ ENFORCEABLE. California Uniform Trade Secrets Act (CUTSA) and federal DTSA allow injunction and damages for misappropriation.
    Choice of law provisions

    Many employers include choice-of-law clauses requiring out-of-state law (e.g., "This agreement shall be governed by New York law"). California courts often refuse to enforce these clauses when they would circumvent California's public policy protecting employee mobility.

    Application of Non-California Law to California Employees (Labor Code § 925): For California employees, choice-of-law and choice-of-venue clauses requiring out-of-state law or forum are voidable if they would deprive employee of California wage/hour protections or noncompete ban. Employee can elect to have California law apply.
    Employee defenses to trade secret and restrictive covenant claims
    Defenses to trade secret misappropriation
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    Not a trade secret
    Information is publicly available, general industry knowledge, or not actually secret. Employer must prove it took reasonable steps to maintain secrecy.
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    General knowledge and skill
    Information is your personal knowledge, skills, and experience developed over career, not employer's proprietary information. You can use general knowledge in new job.
    ❌
    No misappropriation occurred
    You didn't take documents, didn't use confidential information, and didn't disclose trade secrets to new employer. Employer has no evidence beyond speculation.
    🔓
    Independent development
    You or new employer independently developed same information without using employer's trade secrets. No misappropriation if independently created.
    Defenses to noncompete enforcement
  • California law governs: If you work in California, B&P Code § 16600 voids noncompete. Employer cannot enforce.
  • Noncompete is overbroad: Even in states allowing noncompetes, agreement must be reasonable in scope, duration, and geography. If overly broad, court may refuse to enforce or "blue pencil" (narrow) restrictions.
  • No legitimate business interest: Employer must have protectable interest (trade secrets, customer relationships). If you had no access to confidential information or client contact, noncompete may be unenforceable.
  • Lack of consideration: In some states, noncompete signed after employment began requires new consideration (raise, promotion, continued employment). If employer didn't provide consideration, agreement may be void.
    • Defenses to nonsolicitation claims (California)
    • Edwards v. Arthur Andersen: California Supreme Court held that nonsolicitation agreements are enforceable only to extent they protect trade secrets, not general client relationships. If clients are not trade secrets (publicly known, came to you, not from employer's proprietary lists), nonsolicitation likely unenforceable.
    • Clients contacted you: If former clients reach out to you (not solicited), no breach of nonsolicitation.
    • Public information: If client contact info is publicly available (LinkedIn, company website), not a trade secret, and solicitation may be lawful.
    Response strategy to employer demand letters
    Response letter components
    1
    Deny allegations
    Categorically deny taking trade secrets, violating confidentiality, or breaching enforceable restrictions. Do not concede any facts.
    2
    Assert noncompete unenforceability (California)
    Cite B&P Code § 16600. State that noncompete is void under California law and you have right to work in your profession.
    3
    Challenge trade secret designation
    Demand that employer identify specific trade secrets allegedly misappropriated. Argue that claimed "secrets" are general knowledge, publicly available, or not actually confidential.
    4
    State you have not misappropriated anything
    Affirmatively state that you did not take documents, did not download files, and have not disclosed any confidential information to new employer.
    5
    Offer to return materials (if any)
    If you have any employer property (laptop, phone, documents), offer to return promptly. This shows good faith and undercuts claim of misappropriation intent.
    6
    Decline settlement / demand withdrawal
    State that claims are meritless and demand employer withdraw them. If employer persists, state you will vigorously defend and seek attorney fees under CUTSA (available for bad faith claims).
    Do not negotiate from weakness: If you're in California and signed noncompete, do not offer to "compromise" by agreeing not to work for 6 months. This concedes enforceability of void agreement. Stand firm on B&P Code § 16600.
    When to settle vs. fight

    Settle when:

    • You actually took confidential documents or information and employer has proof
    • Restrictive covenant is enforceable under applicable state law and you are violating it
    • Litigation would be more expensive than settlement (e.g., employer offers $10K release, litigation would cost $50K+)

    Fight when:

    • You're in California and employer is trying to enforce noncompete (void under § 16600)
    • You didn't take any confidential information and employer has no evidence
    • Claimed "trade secrets" are publicly available or general knowledge
    • Employer is making baseless threats to intimidate you into leaving new job
    Attorney fees under CUTSA: If employer brings bad faith trade secret claim, you can recover attorney fees under California Uniform Trade Secrets Act. This deters frivolous threats.
    Attorney services for defending trade secret and noncompete claims

    I represent employees facing trade secret misappropriation allegations, noncompete enforcement demands, and nonsolicitation claims. My practice focuses on leveraging California's strong employee protections, identifying defenses, and negotiating favorable resolutions or defending litigation.

    How I help employees
    ⚖️
    California law expertise
    I assert B&P Code § 16600 to void noncompetes, challenge nonsolicitation under Edwards v. Arthur Andersen, and defend trade secret claims under CUTSA.
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    Defense strategy
    I analyze restrictive covenants, assess enforceability, identify defenses (no trade secret, general knowledge, independent development), and evaluate litigation risk.
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    Response letter drafting
    I draft strategic response letters denying liability, asserting unenforceability, and demanding withdrawal of baseless claims.
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    Negotiation & litigation
    I negotiate with employer counsel to resolve claims, or defend against TROs/injunctions and litigate trade secret cases when employer persists.
    Received a trade secret or noncompete demand letter?
    Schedule a consultation to discuss your defense. I'll review the allegations, assess enforceability under California law, identify defenses, and explain your options.
    Email: owner@terms.law