Non-Compete Agreements: Are They Enforceable in Your State?

Non-Compete Agreements: Are They Enforceable in Your State?

Non-compete agreements have become common in employment contracts across many industries — from tech to food service. But their enforceability varies dramatically from state to state, and some workers sign them without realizing they may have little or no legal effect.

What Is a Non-Compete Agreement?

A non-compete agreement (or non-competition clause) is a contract provision that restricts an employee from working for a competitor — or starting a competing business — for a defined period after leaving their current employer.

Typical restrictions include: - Geographic scope: Cannot work within 50 miles of the employer - Time period: Cannot compete for 12–24 months after departure - Industry scope: Cannot work for direct competitors in the same industry

Enforceability by State

States That Generally Ban or Rarely Enforce Non-Competes - California: Non-competes are virtually unenforceable except in narrow circumstances (sale of a business) - North Dakota: Generally unenforceable - Oklahoma: Unenforceable except for some narrow business sale contexts - Minnesota (as of 2023): Non-competes unenforceable for new hires

States With "Reasonableness" Standards Most states (Texas, New York, Florida, Illinois, etc.) will enforce non-competes only if they are: 1. Supported by adequate consideration (signing bonus, job offer) 2. Reasonable in duration 3. Reasonable in geographic scope 4. Necessary to protect a legitimate business interest (trade secrets, customer relationships, specialized training)

The FTC Rule Controversy In 2024, the Federal Trade Commission issued a rule banning most non-compete agreements nationally. That rule has faced legal challenges. Check current status, as the legal landscape continues to evolve.

What Counts as "Legitimate Business Interest"?

Courts evaluate whether the employer has a real need to protect: - Trade secrets or confidential information the employee was exposed to - Specialized training the company provided - Customer relationships the employee developed

A fast food company trying to enforce a non-compete on a cashier has no legitimate interest — a tech company protecting proprietary algorithms from a departing engineer does.

What Should Be in a Properly Drafted Non-Compete?

If you're an employer drafting a non-compete that you want to actually hold up in court:

1. 1Define scope narrowly — overly broad agreements are thrown out
2. 2Limit geographic area to where you actually do business
3. 3Keep time limits to 12 months or less — courts look unfavorably at 3-5 year restrictions
4. 4Define "competitor" specifically — vague definitions fail
5. 5Provide consideration — either a job offer, signing bonus, or promotion

For Employees: Before You Sign

• Ask what specific information or relationships you're being asked to protect
• Negotiate the scope and duration before signing
• In states like California, you can often ignore a non-compete entirely after leaving
• Consult an employment attorney if you're unsure — especially if you're mid-career with a specialized skill set

Non-Compete vs. Non-Solicitation vs. NDA

don't confuse these three related but distinct agreements: - Non-compete: Prevents you from working for competitors - Non-solicitation: Prevents you from recruiting your employer's clients or employees - NDA (Non-Disclosure Agreement): Prevents you from sharing confidential information

Non-solicitation and NDA agreements are enforced much more broadly than non-competes, even in California.