This is the Counsel's Desk, on Terms.Law Radio. Ninety two point five. This is the Washington to Contract report. Tonight, an evergreen employment briefing: how to protect your business when the noncompete, the clause everyone reaches for first, is the least reliable tool in the drawer. The federal picture has been unstable for years, the states have gone their separate ways, and California will void most of what you write no matter where you wrote it. So tonight is about drafting for that world: what still works, what fails, and how to build a restrictive covenant stack that survives contact with the map.

First, the lay of the land, stated carefully. At the federal level, there was a high profile attempt to ban most employment noncompetes nationwide by regulation, and it drew immediate court challenges. I am deliberately not telling you where that fight stands tonight, because it has moved more than once and may move again; if your planning depends on it, verify the current status the week you act. The practical point is that the federal fight is almost beside the point, because the states already decided most of this. A handful of states void employment noncompetes almost entirely, California most prominently. A larger group enforces them only within limits: reasonable time, reasonable geography, a protectable interest. And several states have added wage floors, so the clause is void for workers under a salary threshold. Same clause, fifty different fates. If you have employees in more than one state, you do not have a noncompete policy. You have a noncompete map.

California deserves its own paragraph, because it anchors the strict end of the map and because so many remote employees live there. Business and Professions Code section sixteen six hundred voids contracts that restrain anyone from engaging in a lawful profession, trade, or business, and California courts have applied it broadly for over a century. In recent years the legislature strengthened it further: the prohibition reaches agreements signed out of state with people who live or work in California, employers have faced notice obligations for void clauses, and attempting to enforce a void covenant carries its own exposure. The message to a multistate employer is blunt: do not paper a California workforce with noncompetes and hope. The recognized exceptions are narrow and mostly transactional, chiefly the sale of a business, where the seller of goodwill can agree not to compete with what was sold, under section sixteen six oh one. That exception is real and useful in an acquisition. It does not rescue the ordinary employment clause.

So what actually protects the business? A stack. Four layers, each doing a job the noncompete was pretending to do.

Layer one, confidentiality and trade secrets. The strongest layer and the most portable. Every state protects trade secrets, and federal law adds a nationwide civil claim on top. But the protection follows the diligence. You need a well drafted confidentiality agreement that defines what is confidential without sweeping in everything an employee ever learned, because courts have grown skeptical of confidentiality clauses so broad they operate as disguised noncompetes. Mark the crown jewels, restrict access to them, cut off access at departure, and document all three. Trade secret disputes tend to turn on the company's own housekeeping more than on the departing employee's villainy.

Layer two, nonsolicitation, split into two very different clauses. Employee nonsolicitation, the promise not to raid the team, is enforceable in many states within reasonable limits, though California is hostile to that one too. Customer nonsolicitation is the trickier animal. In reasonableness states it can work when tied to relationships the employee actually serviced and to a modest time period. In California, customer nonsolicits are generally treated as void restraints, with one practical caveat: conduct that amounts to trade secret misuse, like soliciting customers by exploiting a confidential customer list, can still be attacked through the trade secret layer. Draft the two clauses separately, never as one blended paragraph, so a court striking one does not take the other down with it.

You're listening to the Washington to Contract report, on the Counsel's Desk, Terms.Law Radio.

Layer three, invention assignment. The clause founders forget until a diligence questionnaire asks for it. Every employee and every contractor who might create anything should sign a present tense assignment of work related inventions and intellectual property. I hereby assign, not I agree to assign. That single verb tense has decided real disputes. California adds a statutory guardrail: Labor Code section twenty eight seventy protects inventions an employee develops entirely on personal time, without employer equipment or trade secrets, and outside the employer's business, and an assignment clause that fails to carve that out, with the required written notice, invites trouble. Several other states have similar statutes. The efficient drafting move is to include the carve out and the notice everywhere, because the clause remains fully effective for everything that actually matters to the business.

Layer four, time based mechanics that compensate instead of prohibit. Notice periods, where the employee must give sixty or ninety days notice and the employer may pay them while keeping them off customer accounts, the garden leave idea. Deferred compensation with service based vesting. These travel better across state lines precisely because they pay for loyalty rather than punishing departure, though even here, test the strict states individually before relying on them.

Two drafting disciplines hold the stack together. Discipline one, severability with realistic expectations. A severability clause is standard, but states differ sharply on what a court will do with an overbroad covenant. Some will blue pencil, striking words but adding none. Some will reform the clause down to the enforceable maximum. And some will refuse to fix it at all and void the whole thing, partly to discourage employers from drafting broad on purpose. Which means the old strategy of writing the most aggressive clause imaginable and letting a judge trim it is affirmatively dangerous in a growing number of places. Draft each covenant no broader than the interest it protects, and name the interest in the clause itself.

Discipline two, the strictest state question. For a multistate or remote workforce, either maintain state specific agreement versions, more accurate and more work, or draft to the strict end of the spectrum and accept losing tools you could have used elsewhere. What you cannot do is pick a friendly state's law in the choice of law clause and expect it to carry a restraint into a state that voids them. Strict states have shown they will disregard the choice of law, and California has said so by statute. The contract follows the worker, not the other way around.

Close with the reframe. The point of this entire area is not restraining the departing employee. It is protecting information, relationships, and inventions, and each of those has a tool built for the job. Companies that rely on the stack rarely miss the noncompete. Companies that rely on the noncompete tend to discover its limits at the worst possible moment, after the person is already gone.

The practical question is whether your contract gives you an exit if the policy environment changes. The Terms.Law analyst and the related contract checklists are at terms dot law.

The fine print. This broadcast is commentary and general information, based on public reporting and government documents as of July tenth. It is not legal advice and not investment advice, and listening does not create an attorney client relationship. Employment law varies by state and moves fast, so verify current law in your states before you act on anything you heard tonight. I'm the AI voice of Terms.Law Radio. The analysis belongs to Sergei Tokmakov, California attorney. Stay tuned, stay skeptical, and protect the interest, not the ego. Good night.