When Are Non-Compete Agreements Enforceable?

A non-competition agreement is a contract that restricts an employee from working for competing businesses or from starting the same business after leaving their current job. Its enforceability depends on the state where you live. A federal effort to ban most non-competes nationwide was struck down in 2024, leaving state law to continue controlling enforceability.

Signing a non-compete agreement can feel unsettling, especially if you are not sure what it covers. These agreements can limit where you work, what clients you can take with you, or what kind of work you can do after leaving a job.

In this article, you’ll learn about what non-compete agreements are, how federal and state laws treat them, and what you can do if an employer asks you to sign one. If you have concerns about a non-compete agreement, consider speaking with an employment law attorney near you for legal advice. They can review the agreement and help you understand your options.

What Is a Non-Competition Agreement?

A non-competition agreement, also known as a non-compete contract or NCA, is a type of employment contract between an employer and an employee. It restricts you from working for competing businesses or starting a similar company for a certain period of time or within a specific location after you leave your job. Employers use NCAs to protect sensitive business information, trade secrets, and customer relationships built during your tenure.

Non-competes are often confused with two other types of restrictive covenants that appear in employment agreements:

• Non-disclosure agreements (NDAs) limit what confidential information you can share. However, they don’t restrict where you can work.
• Non-solicitation agreements prevent you from contacting the company’s clients or recruiting its employees after you leave. They generally do not bar you from working in the same industry.

Non-competition agreements are the most restrictive of the three because they can limit your ability to earn a living in your field. That’s why courts tend to scrutinize them more carefully than other post-employment restrictions.

Federal Law and Non-Compete Agreements

For a brief period, it appeared that most non-compete agreements nationwide would become unenforceable. In April 2024, the U.S. Federal Trade Commission (FTC) issued its Final Non-Compete Rule. This proposed rule would have banned employers from entering into, enforcing, or attempting to enforce non-compete provisions for almost all workers. However, the rule never took effect.

On August 20, 2024, a federal district court in Texas struck down the FTC rule imposing a nationwide ban on noncompete agreements. In Ryan LLC v. FTC, the federal court held that the rule exceeded the FTC‘s statutory authority. The court added that the rule was arbitrary and capricious, criticizing the blanket ban on all non-compete agreements and stating that it failed to take into account legitimate business purposes that the NCA can serve.

This means that state law now controls whether employers can enforce non-compete agreements. As of March 2026, there is no federal protection against non-competes for most workers. Federal laws that protect trade secrets, such as the Defend Trade Secrets Act, remain in effect. However, the law expressly bars courts from using it to prevent someone from taking a new job. It also addresses the misuse of confidential information, not when applying for new employment.

State Non-Compete Laws

Because the FTC final rule was vacated, the enforceability of your non-compete depends on where you work. States fall into three broad categories:

• States that ban non-compete agreements entirely
• States with salary thresholds for non-compete agreements
• States that enforce non-competes with restrictions

State laws cover the entire spectrum when it comes to NDA enforceability. Let’s look at a few examples.

States That Ban Non-Competes Entirely

Some states no longer enforce non-competition agreements at all. These include:

California

California has one of the strongest prohibitions in the country. Under California’s Business and Professions Code, non-competes are void with very narrow exceptions. The state legislature passed the law in 2023 and clarified that the non-compete ban applies even if the contract was signed in another state, as long as you live or work in California. The exceptions mentioned by the California Supreme Court in the case of Edwards v. Arthur Andersen LLP (2008) are:

• Sale of the goodwill of a business or ownership interest in the business entity
• Dissolution of or dissociation from a partnership
• Dissolution of or termination of interest in an LLC

California remains one of the worker-friendliest states.

Minnesota

In Minnesota, non-compete agreements are referred to as “covenant not to compete.” The ban covers not just traditional employees but also independent contractors, making it one of the broader state prohibitions in the country. 

Non-disclosure agreements and non-solicitation agreements remain valid and enforceable under the statute.

North Dakota

North Dakota was one of the earliest states to impose restrictions on non-compete agreements. Under North Dakota law, these agreements are generally void, with only limited exceptions. The exceptions apply to the sale of a business, the dissolution of a partnership, LLC, or corporation, or the dissociation of a partner or a member. 

The North Dakota Supreme Court also refused to enforce out-of-state choice-of-law or forum-selection clauses that would circumvent the state ban. If you live or work in North Dakota, an employer generally cannot use provisions that would go against the state’s policy against non-compete agreements.

Oklahoma

Oklahoma bans most non-competes. This provision voids any contract that prevents a person from exercising their right to a lawful profession, business, or trade. There are narrow exceptions for the sale of a business and the dissolution of a partnership.

States With Salary Thresholds

Ten states permit non-competes but restrict them to employees above a certain income level. Here are the key states and their thresholds. Many of these figures are adjusted annually, so it is important to check your state’s current guidelines.

These numbers are subject to change. Most of these thresholds are tied to inflation, federal poverty levels, and other factors. Always verify with your state’s labor agency website for the most current threshold amount.

States That Enforce Non-Competes With Restrictions

Most remaining states will enforce non-competes, but only if they meet a reasonableness standard. Courts in these states tend to view NCAs as restraints of trade and evaluate them together with antitrust and unfair competition principles. They will examine whether the agreement is narrowly tailored to protect a genuine business interest. They also consider whether it places an unnecessary burden on your ability to find work.

When Are Non-Compete Agreements Enforceable?

In states that allow NCAs, courts examine whether the agreement is reasonable before allowing the application. It considers several factors when assessing its enforceability.

To start, the employment agreement must protect a legitimate business interest. This may include trade secrets, confidential client relationships, or other business information. 

Duration matters as well. Most courts consider restrictions of one to two years reasonable. Agreements that extend beyond that period face a higher risk of being unenforceable.

The agreement also needs to be supported by valid consideration, something of value in exchange for your promise not to compete. If you signed before starting the job, the offer of employment is generally sufficient. Whether continued employment alone qualifies depends on your state. Most states treat it as adequate, but Illinois, Missouri, North Carolina, and Pennsylvania require something more concrete, such as a raise, a promotion, or access to new confidential information.

A court finding a non-compete overbroad does not necessarily void the agreement entirely. Some states allow judges to modify the terms to make them reasonable. This is a practice also known as “Blue Pencil Doctrine,” whereby courts can modify unreasonable non-compete agreements in order to make them fairer for employees. Other courts will refuse to enforce the agreement as written.

What To Do if You’re Asked To Sign a Non-Compete

Your response to a non-compete agreement depends on whether you’ve already signed it or are still deciding whether to sign. Take the time to analyze your situation before signing an NCA.

Before You Sign

Receiving a non-compete agreement does not mean you have to accept it as written. Before you sign, you can take the following steps:

• Read the agreement carefully: Take note of the geographic scope, duration, and types of work restricted. Vague or overly broad language can be a red flag. It’s worth addressing those before you sign. 
• Research your state’s laws: As discussed above, some states do not enforce these agreements at all, and others enforce them only for higher earners. Understanding your state’s rules gives you negotiating leverage.
• Negotiate the terms: If the terms are too severe, ask for concessions. You may be able to shorten the duration, narrow the geographic area, or limit what counts as competing work.
• Ask for time to review it: Don’t sign anything you haven’t examined. A reasonable employer will not pressure you into signing immediately. If you have any concerns, speak with an employment attorney.

Not having signed yet gives you a bit of an advantage. Be certain before jotting down your signature.

If You Already Signed

Signing a non-compete does not guarantee it will be enforced against you. You can consider the following:

• Check your state’s law: If you live and work in a state that bans non-competes, the agreement may be void regardless of what it says
• Review whether consideration was adequate: If you signed after starting your job and received nothing in return, the non-compete clause may lack the legal consideration required to make it binding
• Review the scope: Even at the state level, where non-compete enforcement is legal, courts frequently decline to enforce it when the geographic area is too broad, the enforcement period is too long, or the category of work is too broad

If you feel as if you’re being taken advantage of, speak with an employment attorney.

What Happens if You Violate a Non-Compete?

If a former employer believes you have violated a non-compete agreement, they have several legal options. These include:

Injunctions

The most common remedy is an injunctive relief, where a court order will require you to stop working for the competing employer. Courts can issue temporary restraining orders or preliminary injunctions on short notice. This means that you may be ordered to leave a new job while the case is ongoing.

Monetary Damages

Employers may also sue for monetary damages if they can demonstrate actual losses, such as you taking clients with you to a competitor. For monetary damages, employers must present concrete evidence of lost profits, which frequently requires expert testimony.

Get Legal Help With a Non-Compete Agreement

The laws governing non-compete agreements can be highly state-specific and change frequently. Whether you have been asked to sign an agreement or are weighing a job change, these agreements can affect your ability to earn a living in your chosen field.

An experienced employment attorney can review your agreement, explain how your state’s laws apply to your situation, and help you understand your options before you make any decisions. FindLaw’s attorney directory can help you find an employment attorney near you.