A non-compete agreement restricts an employee or business partner from competing with the company for a period of time after the relationship ends. They're powerful tools — but increasingly controversial and heavily regulated.
The enforceability landscape
Non-compete enforceability varies dramatically by state:
- Banned entirely — California, Minnesota, Oklahoma, and North Dakota. Courts in these states will not enforce non-competes under almost any circumstances.
- Heavily restricted — Illinois, Washington, Colorado, Oregon, and others have specific income thresholds or duration limits.
- Generally enforceable — most other states enforce non-competes if they're reasonable in scope, duration, and geographic area.
The FTC attempted to ban non-competes nationally in 2024, but the rule was challenged in court. Check current state law before drafting.
What makes a non-compete enforceable
Courts look for three factors:
- Legitimate business interest — trade secrets, customer relationships, specialized training.
- Reasonable scope — what activities are restricted, how far (geographic or industry), and for how long.
- Adequate consideration — the employee received something in return (new employment, a bonus, equity, or access to confidential information).
Key terms
- Duration — 6–12 months is standard and most likely to be enforced. 2+ years is rarely upheld.
- Geographic scope — should match the actual area where the employee worked or had influence.
- Activity scope — should be limited to the specific type of work the employee performed, not an entire industry.
- Garden leave — the employer pays the employee's salary during the restricted period. This significantly improves enforceability.
Non-compete alternatives
In states where non-competes are banned, consider:
- Non-solicitation — prevents poaching clients and employees. Generally enforceable everywhere.
- Confidentiality — prevents use of trade secrets. Enforceable in all states.
- Non-dealing — prevents the former employee from affirmatively soliciting specific clients.
Make it legal
- Both parties sign.
- The employee should receive separate consideration (a bonus, equity, or continued employment).
- Keep a signed copy.
A state-specific non-compete agreement drafted to your jurisdiction takes about ten minutes.