The Next Wave Of Restrictive Covenants Litigation: When Function Matters More Than Form

A consequential noncompete may be the one that’s not called a noncompete at all.

It may appear as a confidentiality clause that prevents an employee from using the knowledge needed to continue working in the industry. Or a client non-solicitation or no-service provision that places much of the available market off limits. Or a training-repayment obligation that makes leaving prohibitively expensive.

Whatever the label, the practical message may be the same: You’re free to leave—but not to compete.

After the Federal Trade Commission abandoned its defense of its rule banning noncompetes, employers focused on bringing traditional noncompetes into compliance with an increasingly fragmented body of state law. Many narrowed their restrictions, adopted compensation thresholds, excluded lower-wage workers, or stopped using noncompetes altogether.