Employers have been trying to keep their former employees from taking away business for a long, long time. Non-compete agreements have been around since at least 1414, when an apprentice dyer accused of working before his obligation to his master was up won a court hearing in England. (His former boss didn't show up for the trial.)
While the working world has since evolved in countless ways, non-compete clauses are still often a part of employment contracts. Do they have any bite, or have they become unenforceable? With no federal regulations in place yet, it falls to states to decide whether restrictive covenants like non-compete agreements are permitted within their jurisdiction.
For many business owners, non-compete provisions are a viable way to protect trade secrets, intellectual property, and customer lists. However, for former employees, dealing with non-compete provisions and non-competition agreements can seem like an unfair infringement on their legitimate business interests.
Did You Read the Fine Print?
For most professions, the days of a job being offered and accepted with little more than a handshake are long gone. A written contract, reviewed and signed by both employer and employee, has become the norm. While some are bare-bones agreements stipulating the rate of pay and other necessary bits, many work contracts are loaded with protections and clauses designed to safeguard the interests of the company. This is extremely common for contracts with independent contractors.
Contracts exist to serve as a legal agreement where both sides gain some benefit from the deal. For the person getting hired, employment is often the enticement. It usually means some form of agreed-on payment for their services, and perhaps other perks and benefits such as health insurance coverage or a signing bonus.
For employers, every hiring is a potential risk for their company. Training employees often means teaching them trade secrets or making them privy to confidential information about plans or functionality that would give their competitors an advantage to know.
Non-compete agreements are intended to keep an employee from leaving a company and taking their customers with them to provide an unfair competitive edge for their new employer. Still, do employers have the right to attach riders to employment contracts that lock a person out of their field of specialty for an overlong period of time or an unreasonable geographic scope?
How Non-Compete Clauses Work (If They Work)
Most non-complete agreements are embedded into an employment contract. If a new employee signs a contract with a non-complete clause in the verbiage, they have agreed to the terms. The enforceability of non-compete agreements is an entirely different matter.
Under the Biden administration, the Federal Trade Commission (FTC) finalized a proposed rule in 2024 to make most non-compete agreements unenforceable. It was met immediately with a number of lawsuits, including one that got a preliminary injunction issued against the FTC rule being enforced in September. The FTC can continue to address non-competes on a case-by-case basis.
This means non-competes are handled at the state level. Most non-complete clauses fall into one of several categories. These include:
- Complete/Near-Complete Bans: These bans essentially eliminate all non-competes in an employment context within the state in question. As of June 2025, this applies in four states - California, Minnesota, North Dakota, and Oklahoma.
- Income threshold bans: States that use an income threshold ban forbid non-compete clauses to be applied to workers under a specified income amount. As of June 25, 2025, this applies in nine states and allows bans for high-level positions like senior executives or law firm partnerships. Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Virginia, Washington, and Washington, D.C. currently have income threshold bans.
- Healthcare industry/Other industry bans: Healthcare non-compete bans walk a legal tightrope due to high amounts of healthcare legislation and proprietary information battling with the rights of healthcare workers. Some states have provisions banning non-competes for other types of employment that are not part of the healthcare industry.
As of June 25, 2025, 10 U.S. states have no bans in place for non-compete agreements.
Non-compete clauses usually include punitive measures in case the employee violates the agreement. These can include financial penalties and leave the former employee open to legal action involving a cease-and-desist order. In almost all cases, the non-compete clause is argued in court as a breach of contract.
In a state that allows non-compete agreements, the court will scrutinize the clause to see if it carries reasonable provisions. These usually revolve around scope, duration, and geographic area. Expecting someone to be unable to work in their field of expertise for an excessive period of time is likely to be deemed unenforceable. For example, Florida and Louisiana limit non-competes to a two-year maximum.
If all this makes it seem like non-compete employment agreements are difficult to enforce, that's not far from the truth. Egregious violations such as the sharing of protected trade secrets or a company's intellectual property often go poorly for the former employee.
In most other instances, narrow and specific guidelines have a better chance of being upheld. Short time limitations, small geographic restrictions, limited skill banning, and forbidding the poaching of the former employer's established customers for a reasonable period of time offer the best chance of success. If you find yourself on either side of a contested non-compete agreement, getting legal advice from an employment law attorney is an option to consider.
Related Resources
- Employee Rights Overview: Your Guide to Labor Laws (FindLaw's Wages and Benefits Laws)
- Non-Competition Agreements: Overview (FindLaw's Employment Law)
- Can I Sue for Breach of Contract? (FindLaw's Filing a Lawsuit)
