Are Non-Compete Agreements Enforceable?

A non-compete agreement restricts an employee from working for a competitor or starting a competing business for a period after leaving (Cornell LII). Whether one can be enforced against you depends mostly on state law.

The federal picture in 2026

The FTC issued a rule in 2024 that would have banned most non-competes, but a federal court blocked it nationwide in August 2024, and the FTC later stopped defending it. Instead, the FTC now pursues case-by-case enforcement against non-competes it considers unfair, especially broad agreements covering low-wage workers (McDermott).

States that ban or sharply limit non-competes

• California voids contracts that restrain anyone from engaging in a lawful profession, trade or business, with narrow exceptions (Bus. & Prof. Code 16600).
• Minnesota voids employee non-competes entered on or after July 1, 2023 (Minn. Stat. 181.988).
• North Dakota and Oklahoma also broadly prohibit employee non-competes.
• Many other states limit non-competes to workers above an income threshold, ban them for certain professions like health care, or require advance notice and consideration. Washington enacted a broader ban scheduled to take effect in 2027 (McDermott).

The reasonableness test elsewhere

Where non-competes are allowed, courts generally require:

• A legitimate business interest, such as trade secrets, confidential information or customer goodwill, not just avoiding competition
• Reasonable duration, often measured in months to a year or two
• Reasonable geographic scope tied to where the employer actually does business
• Reasonable scope of activity, limited to similar work
• Consideration, such as the job itself or, in some states, something extra for current employees

Some courts rewrite overbroad terms; others strike the whole clause.

Related restrictions

Non-solicitation clauses (not soliciting clients or employees) and confidentiality agreements are more widely enforced. See NDAs.

Do you get paid during a non-compete?

Usually not, unless the agreement provides "garden leave" pay or a state law requires it.

Before signing or leaving

• Read the agreement and note which state's law it chooses.
• Negotiate narrower terms when you are hired or during severance.
• Before joining a competitor, have a lawyer review the agreement.
• Do not take confidential documents.
• If you receive a cease and desist letter, see what to do.

An employment lawyer can tell you whether your non-compete is likely enforceable.

Sources

1. McDermott Will & Schulte: The FTC's strategy on noncompetes, what employers should know in 2026
2. California Business and Professions Code 16600
3. Minnesota Statutes 181.988, Covenants not to compete void
4. Cornell Law School LII: Covenant not to compete