At a Glance
- Trade secret and non-compete disputes over a departing employee are usually decided by what happens in the first two days, not by the eventual court filing.
- New York is the only state that has never adopted the Uniform Trade Secrets Act. Protection here still runs entirely through the common law and a six-factor test drawn from the Restatement of Torts.
- The FTC’s 2024 non-compete ban is dead. The rule was set aside in court, the agency dropped its appeal in September 2025, and the rule was formally removed from the federal register in February 2026 — which means state law, not a federal rule, now controls.
- New York’s own non-compete ban is still sitting in the legislature, not on the books, so the existing reasonableness test from BDO Seidman v. Hirshberg still governs today.
- Companies that let IT wipe a device before it’s imaged, or that wait weeks to decide on emergency relief, tend to lose the two advantages they had: the evidence and the element of surprise.
In most employment disputes, a company has time to figure out what happened before it must do anything about it. In a trade secret case, that time does not really exist. By the moment someone notices that a departing employee downloaded a client list, forwarded pricing data to a personal email account, or walked out with a laptop full of source code, the most consequential decisions in the case have often already been made, whether anyone realizes it or not.
These disputes are rarely won or lost in the motion practice that follows. They are won or lost in the first forty-eight hours, when a company decides what to preserve, what to say, and how fast to move. Here is how I think about that window, and where I most often see companies give away an advantage they never get back.
What Actually Counts as a Trade Secret in New York
Not everything a company considers sensitive is a trade secret, and the distinction matters more in New York than almost anywhere else in the country. New York is the only state that has never adopted the Uniform Trade Secrets Act. There is no statute defining a trade secret or spelling out its elements. Protection here runs entirely through the common law, using a six-factor test that New York courts borrowed from the Restatement of Torts and applied in cases like Ashland Management v. Janien: how widely the information is known outside the business, how widely it is known by employees inside the business, the measures taken to guard its secrecy, its value to the business and to competitors, the effort and money spent developing it, and how easily it could be independently developed or reverse-engineered.
That test does real work. A customer list assembled from public sources and general industry knowledge is a very different thing from a pricing model refined over years of proprietary data, even if both feel confidential to the company that lost them. Companies that treat every departing employee’s laptop as a trade secret case, without asking whether the information actually satisfies those six factors, often find that framing collapses under scrutiny. The federal Defend Trade Secrets Act, enacted in 2016, gives companies a parallel route into federal court using a similar but not identical definition, and in practice most well-advised plaintiffs plead the federal claim alongside the New York common law claim. Either way, the underlying question is the same: is this a trade secret, or is it just information the company would prefer to keep to itself?
Non-Competes Are Still Enforceable, But the Ground Just Shifted
For a while, the biggest open question in this area was whether the FTC would ban non-competes outright. That question has been answered, and the answer is no, at least not federally and not anytime soon. The FTC’s 2024 rule, which would have voided nearly every existing non-compete in the country, was set aside in Ryan LLC v. FTC, and the Commission abandoned its appeal in September 2025. By February 2026, the rule was formally removed from the Code of Federal Regulations. The agency has said it will still pursue individual non-competes it considers unfair under Section 5 of the FTC Act, and it has already secured a consent order from a large pest-control company covering thousands of workers, so this is not a green light to use non-competes however a company likes. But there is no longer a federal rule displacing state law, which means state law is once again the whole story.
In New York, that story hasn’t changed as much as some clients expect. Non-competes are enforceable if they satisfy the reasonableness standard from BDO Seidman v. Hirshberg: reasonable in time and geographic scope, no broader than necessary to protect a legitimate business interest such as trade secrets or a genuinely unique service relationship, not unduly burdensome on the employee, and not harmful to the public. That could change. A bill that would prohibit most non-competes for employees below a high compensation threshold passed the New York Senate again in June 2026 and is sitting in the Assembly Labor Committee, and Governor Hochul vetoed a broader version of the same idea back in 2023. Until something like that actually becomes law, existing agreements are still evaluated under BDO Seidman, not under a ban. Companies drafting new agreements should be watching the legislature, not assuming the current rule is permanent, but they also shouldn’t assume it has already changed.
The Mistakes That Cost Companies the Case
The most damaging errors happen before anyone has called a lawyer. IT reissues the departing employee’s laptop to the next new hire before anyone images the drive, and the forensic record that would have shown exactly what was copied and when is gone. A frustrated manager fires off a demand letter that overstates what the company knows, and that letter becomes an exhibit the other side uses to show the claim was never grounded in fact. HR treats the exit interview as a formality instead of an opportunity to ask direct questions about devices, accounts, and where the employee is headed, and the company loses the one conversation where the departing employee was still willing to talk.
The through line in all of this is the same. Companies react to the emotional fact of the departure before doing the unglamorous work of figuring out what was taken and how they can prove it. The employees who cause the most damage are rarely careless about it, and a company that moves on instinct instead of evidence usually ends up chasing a narrative it cannot support.
When Emergency Relief Makes Sense, and When It Backfires
Trade secret cases are one of the more common places where a temporary restraining order or preliminary injunction fits the facts, because the harm — a competitor gaining permanent access to confidential information — is often exactly the kind of harm money cannot undo later. I’ve written elsewhere about how courts evaluate that kind of emergency relief and why irreparable harm is usually the factor that decides the motion. [When a Business Dispute Becomes an Emergency: TROs and Preliminary Injunctions] The same principle applies here with force: courts want specific evidence that the information was taken, that it’s the kind of thing damages cannot fix, and that the company moved quickly once it found out.
That last point is where trade secret cases go wrong most often. A company that spends three weeks deciding internally whether the situation is serious enough to justify a lawsuit has usually undermined its own claim of urgency by the time it files. If the facts support an emergency motion, the decision to bring one needs to be made in days, not weeks, and the forensic and factual record must be built well before the motion is drafted, not scrambled together afterward.
Related Reading
For more from Thomas Przybylowski on emergency relief and early case strategy, see When a Business Dispute Becomes an Emergency: TROs and Preliminary Injunctions and Commercial Litigation in New York: Common Claims and Early Case Strategy.
The Bottom Line
Trade secret and non-compete disputes are decided early, often before either side has filed anything. The company that preserves evidence immediately, resists the urge to send an accusatory letter before it knows what happened, and makes a clear-eyed decision about emergency relief within days rather than weeks is the company that ends up with leverage. The one that waits, wipes the laptop, or leads with accusations it can’t yet prove usually finds that the moment it needed has already passed.
Frequently Asked Questions about Trade Secret and Non-Compete Legal Disputes
Does New York have a trade secrets statute?
No. New York is the only state that has never adopted the Uniform Trade Secrets Act. Trade secret protection here comes entirely from the common law, using a six-factor test New York courts adapted from the Restatement of Torts in cases like Ashland Management v. Janien. Companies can also bring a parallel claim under the federal Defend Trade Secrets Act.
Is the FTC’s non-compete ban still in effect?
No. The rule was blocked by a federal court in 2024, the FTC dropped its appeal in September 2025, and the rule was formally removed from the Code of Federal Regulations in February 2026. The FTC has said it will still challenge individual non-competes it considers unfair, but there is no longer a categorical federal ban, so state law governs.
Are non-competes still enforceable in New York?
Yes, for now. New York courts apply the reasonableness test from BDO Seidman v. Hirshberg, asking whether the restriction is reasonable in time and geography, no broader than necessary to protect a legitimate business interest, and not unduly harsh on the employee or harmful to the public. A bill that would ban most non-competes has passed the state Senate but has not become law.
What should a company do in the first 48 hours after discovering a possible trade secret theft?
Preserve the departing employee’s devices and accounts before IT reissues or wipes anything, document what is known versus suspected, and avoid sending demand letters that overstate the evidence. Those early decisions typically matter more than anything filed later.
When does a trade secret dispute justify an emergency motion?
When the company can show specific evidence that confidential information was taken, that money damages will not undo the harm, and that it moved quickly after discovering the problem. Delay is one of the most common reasons emergency relief gets denied.
About the author
Thomas Przybylowski is a litigation attorney with extensive experience leading complex commercial litigation, business disputes, and high-stakes matters involving departing employees, restrictive covenants, and trade secrets. He previously practiced at Pomerantz LLP and Schulte Roth & Zabel LLP and was named a Super Lawyers® Rising Star in 2020 and 2021. He is admitted to practice in New York and New Jersey.