A non-compete is a promise by an employee not to work for a competitor, or start a competing business, for a period after leaving. There is no federal ban, so state law decides whether one is enforceable. California, Minnesota, North Dakota and Oklahoma ban them for employees, Washington’s ban takes effect in 2027, and many other states limit them. For most startups, the better protection is a confidentiality and invention assignment agreement, a narrow non-solicit, and trade secret law, not a non-compete.
Key takeaways
- The FTC’s 2024 nationwide ban never took effect and has been formally withdrawn. State law governs.
- Where you can use a non-compete depends on where the employee lives and works, not where your company is incorporated.
- We recommend against non-competes for employees. Save them for the sale of a business, where they’re enforceable almost everywhere.
- A confidentiality and invention assignment agreement (CIIAA) doesn’t contain a non-compete. It protects your IP and confidential information either way.
Is there a federal ban on non-competes?
No. The Federal Trade Commission adopted a rule in 2024 banning most non-competes, but a federal court in Texas set it aside before it took effect. The FTC dropped its appeal, and in February 2026 removed the rule from the federal regulations. The FTC still pursues individual companies whose non-competes it considers unfair, but there is no nationwide rule. Each state’s law applies.
Which states ban or limit non-competes?
| State | Rule for employee non-competes |
| California | Void, for employees and contractors, wherever and whenever signed. Employers can’t include one in a contract. Exceptions: sale of a business, dissolution of a partnership or LLC. |
| Minnesota | Void for agreements signed on or after July 1, 2023, for employees and contractors. Same exceptions. |
| North Dakota | Void, except in the sale of a business or dissolution of a partnership. |
| Oklahoma | An employee can’t be barred from working for a competitor, but can be barred from soliciting the company’s established customers. |
| Washington | Today, enforceable only above an annual income threshold, with notice rules. From June 30, 2027, banned for employees and contractors, including agreements already signed, and employers must notify affected workers by October 1, 2027. |
| Wyoming | Void for agreements signed on or after July 1, 2025, except for executives, managers and their professional staff, trade secret protection, the sale of a business and repayment of training costs. |
| Massachusetts | Allowed with limits: 12 months maximum, not for non-exempt (hourly or overtime-eligible) employees or employees laid off or fired without cause, garden leave (50% of pay) or other agreed consideration, and the agreement must come with the offer or 10 business days before the start date. |
| Virginia | Void for lower-paid and non-exempt employees. From July 1, 2026, unenforceable against an employee fired without cause unless severance was disclosed when the agreement was signed. |
| Tennessee | From July 1, 2026, void for employees earning under $70,000 a year. |
| Income thresholds | Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island and Washington, DC bar non-competes below an income level, most adjusted each year. |
| Nevada | Not allowed for hourly employees. |
| New York | No statute yet. The legislature has passed bans that the governor vetoed. Courts enforce only reasonable non-competes that protect a legitimate interest. |
| Florida | Moving the other way. A 2025 law makes non-competes of up to four years easier to enforce for higher-paid employees. |
Many states also have separate rules for doctors and other healthcare workers. This isn’t a complete list, and state law changes quickly, so check the rules for each state where you have employees.
What makes a non-compete enforceable where it’s allowed?
Where non-competes are allowed, courts enforce only reasonable ones: limited to the work the employee actually did, to real competitors, to the area where the company operates, and to a short period, usually 6 to 12 months for employees. A restriction on working “in any industry” for years won’t hold up. Many states also require something of value in exchange, such as the job offer itself, a raise or a bonus, and some require advance notice.
Should my startup use non-competes?
For most employees, no. They’re unenforceable in a growing list of states, they make strong candidates hesitate, and they rarely protect what actually matters. Protect the company instead with:
- A CIIAA that every employee signs, covering confidentiality and assigning their work product to the company. See The CIIA Agreement.
- A narrow non-solicit, where enforceable, barring a departing employee from poaching your employees or customers for a limited time. See Non-Solicitation Clauses.
- Trade secret law, which protects confidential information whether or not anyone signed a non-compete. See Trade Secrets.
If you do use one, limit it to senior executives in states that allow it, keep it narrow, and pay for it where the state requires (for example, garden leave in Massachusetts).
Do co-founders need a non-compete?
Usually not. A co-founder’s CIIAA protects the company’s IP and confidential information, and their unvested shares already give them a reason to stay. A CIIAA doesn’t include a non-compete, so if you want one you’d need a separate agreement, and it’s subject to the same state rules as any employee’s. The place founder non-competes matter is a sale of the company (see below).
What about advisors and contractors?
Leave the non-compete out. It’s unusual for an advisor and hard to enforce, and California and Minnesota ban them for contractors (Washington will from 2027). Use confidentiality terms and a requirement that the advisor disclose conflicts instead. If an advisor agreement you’ve been sent includes a non-compete, it’s reasonable to ask to strike it.
What happens in an acquisition?
Buyers routinely require the selling founders to sign non-competes as part of the deal, often for two to five years. These are treated differently from employee non-competes and are enforceable even in California, because they protect the goodwill the buyer is paying for. Courts still expect them to be reasonable in scope and length, so an overbroad one can fail even in a sale.
What if we already have non-competes?
Review them by state. Stop using them for employees in ban states, and don’t try to enforce one against an employee in California even if the contract says Delaware law applies, because California won’t honor that choice of law. Washington employers will need to notify affected employees and contractors by October 1, 2027. Keep the confidentiality and non-solicit parts, which are usually enforceable on their own.
Related: Non-Solicitation Clauses · The CIIA Agreement · What Do I Need to Do When an Employee Is Fired? · Employment Agreements
