Non-Compete Agreements: What's Enforceable State by State

A non-compete agreement’s enforceability depends almost entirely on which state’s law governs it, and the range runs from completely void on arrival (California, North Dakota, Oklahoma, Minnesota) to fully enforceable against any employee as long as the scope, duration, and geography are reasonable. In between sits a growing group of states, including Colorado and Washington, that only allow non-competes against employees earning above a set income threshold. Drafting one clause and using it in every state you hire in is close to guaranteed to produce a document that is void in some states and enforceable in others.

This matters more than most contract questions because getting it wrong has an asymmetric cost: an employer relying on an unenforceable non-compete has effectively no protection at all when a key employee leaves for a competitor, and they usually do not find that out until the moment they need the clause to hold up.

Which States Ban Non-Competes Outright?

Four states currently void non-compete agreements against employees almost entirely, with narrow exceptions for the sale of a business or the dissolution of a partnership.

California has the strongest ban, under Business and Professions Code Section 16600, and it goes further than most employers expect: as of 2024, California law makes it unlawful to even include a non-compete clause in an employment contract, or to attempt to enforce one, regardless of where the employee signed it or which state’s law the contract claims applies. Employers with California employees under an out-of-state non-compete were required to notify those employees in writing that the clause is void.

North Dakota and Oklahoma both void non-compete agreements against employees by statute, with the same narrow sale-of-business and dissolution carve-outs as California. Minnesota joined this group more recently: non-compete agreements entered into or modified on or after July 1, 2023 are void for Minnesota employees, though agreements signed before that date are generally still governed by the law in place when they were signed.

Which States Restrict Non-Competes to Higher Earners?

A second group of states does not ban non-competes outright but makes them unenforceable below an income threshold, on the theory that lower-wage workers rarely have access to the trade secrets or client relationships a non-compete is meant to protect, and are the workers most harmed by being locked out of their field.

Colorado only allows non-competes against “highly compensated” workers, using an income threshold that adjusts annually, and requires the employer to give notice of the clause before the worker accepts the job (or, for existing employees, before any new non-compete takes effect). Washington sets a similar earnings threshold, adjusted annually, above which a non-compete can be enforced, and separately caps most non-competes at 18 months unless the employer can show a longer term is reasonable. Illinois bans non-competes for employees earning below a set annual threshold and bans non-solicitation clauses below a lower one, with both thresholds scheduled to increase over time. Oregon, Maine, and a handful of other states use the same structure: a non-compete tied to income, rather than a flat ban or a pure reasonableness test.

What Does “Reasonable” Mean in the States That Allow Non-Competes?

Most states have not banned non-competes and do not use an income threshold; instead, courts apply a reasonableness test with four factors, and a non-compete that fails any one of them risks being narrowed by a court (some states) or voided entirely (others, which refuse to rewrite an overbroad clause).

Scope needs to be limited to the actual work the employee did or the actual trade secrets and client relationships they had access to, not “any business the company is or could be involved in.” Duration needs to be proportionate, commonly six months to two years for a standard employee non-compete (longer terms, sometimes three to five years, show up in sale-of-business agreements, which courts scrutinize differently than employment non-competes). Geography needs to match where the employer actually operates or where the employee actually worked, not an arbitrary nationwide or global restriction for a role with no national reach. Consideration, meaning something of value exchanged for the promise not to compete, matters more than employers expect: the job offer itself is usually enough consideration if the non-compete is signed at hiring, but several states require additional consideration, such as a raise, bonus, or a defined period of continued employment, if the non-compete is introduced after the employee has already started.

Does Federal Law Override State Non-Compete Rules?

In April 2024, the Federal Trade Commission finalized a rule that would have banned most employer non-competes nationwide. Before it took effect, a federal court in Texas set the rule aside nationwide, and the FTC’s appeal has kept the rule’s status tied up in litigation since. As of this writing, the FTC rule is not in effect, and enforceability is governed by state law exactly as described above. Because this is an active area of litigation, confirm the current status before relying on it, rather than assuming either outcome; a nationwide federal rule would not necessarily eliminate the need for state-specific drafting even if it eventually takes effect, since state law would still govern anything the federal rule does not preempt.

How Should the Clause Actually Be Written?

Two non-competes covering the same employee and the same competitive risk can differ entirely in enforceability based on how narrowly they are drafted. An overbroad clause (unlimited geography, a multi-year term, language banning the employee from the entire industry rather than a specific role or client set) is the version most likely to be struck down even in a state that generally allows non-competes, because it reads as protecting the employer’s market position rather than a specific, legitimate business interest.

A non-compete clause is often just one piece of a broader employment contract, and it should be drafted alongside the rest of that document rather than bolted on separately; What to Include in an Employment Contract covers the compensation, IP assignment, and termination language it needs to sit next to. Building the non-compete language itself, matched to your state’s rules on scope, duration, and income threshold, is exactly what the Non-Compete Agreement Generator is built to do, rather than starting from a generic template that assumes every state follows the same reasonableness test.

The practical takeaway is not “avoid non-competes everywhere” or “use the same clause everywhere,” but to check your state’s category first, since that determines whether the clause is worth drafting carefully or not worth including at all.