Non-compete agreements are one of the most contested areas of employment and business law — and they've never been more contested than they are right now.
The FTC attempted a near-total ban in 2024 that was ultimately blocked by federal courts. Multiple states have enacted their own restrictions ranging from salary thresholds to outright prohibitions. And courts across the country continue to split on questions of non-compete agreement enforceability in ways that make prediction genuinely difficult.
Here's what you need to know about what makes a non-compete enforceable in 2025 — and what gets them thrown out.
The Current Legal Landscape
Before drafting or reviewing a non-compete, you need to understand the state-level rules that govern it. This isn't a uniform area of law.
States that ban employee non-competes outright (or nearly so): California, North Dakota, Oklahoma, and Minnesota do not enforce non-competes for employees. (Note: California has narrow exceptions for sale-of-business and partnership dissolution contexts.)
States with salary thresholds: Colorado, Illinois, Washington, and others only allow non-competes for employees above a certain annual salary (ranging from approximately $60,000 to $100,000+ depending on the state). Non-competes with lower-wage workers in these states are void.
States that reform and enforce ("blue pencil" states): Many states will modify an overly broad non-compete to make it enforceable rather than throwing it out entirely. Others will strike the whole clause if any part is unreasonable.
States that require garden leave: Some jurisdictions now require the employer to pay the employee during the restricted period. A non-compete that restricts but doesn't compensate may be void.
Non-compete agreement enforceability questions must start with the governing law of the relevant state. Everything else flows from there.
What Courts Look For: The Reasonableness Test
In states that do enforce non-competes, the central question is reasonableness — evaluated across three dimensions:
1. Geographic Scope
Is the restriction geographically reasonable given the nature of the business and the employee's role?
A national sales director for a company that operates in all 50 states? A nationwide restriction may be reasonable. A hair stylist at a local salon? A restriction covering the entire state of Texas will almost certainly fail.
Courts want to see a nexus between the geographic restriction and the employer's actual competitive interests. The restriction should cover the places where the employee could actually harm the employer — not everywhere.
2. Duration
How long does the restriction last? One to two years is the generally accepted window for most employee non-competes. Courts are skeptical of restrictions exceeding two years, and anything above five years is almost universally unenforceable for employees.
For sale-of-business non-competes (where a business owner sells their company and agrees not to compete), courts are more permissive — restrictions of three to five years are regularly enforced.
3. Scope of Restricted Activity
What exactly is the employee prohibited from doing? A restriction that prohibits working for "any competitor in any capacity" is almost certainly overbroad if the employee was a software engineer and the competitor is a large company with many unrelated divisions.
The restriction should match the employee's actual role and the actual competitive threat. A sales rep who managed the northeast territory shouldn't be restricted from all sales work nationwide.
The Legitimate Business Interest Requirement
Even a geographically and temporally reasonable restriction will fail if the employer can't identify a legitimate business interest it protects. Courts recognize:
- Trade secrets and confidential information: If the employee has access to proprietary information that would harm the employer if disclosed to competitors, that's a legitimate interest.
- Customer relationships: If the employee has developed significant relationships with clients that belong to the employer, restricting solicitation of those clients is usually enforceable.
- Specialized training: Some courts recognize that significant investment in specialized training creates a legitimate interest in restricting the employee's ability to immediately compete.
Vague claims that "all employees have access to confidential information" don't satisfy this requirement. The employer needs to articulate what specific information or relationships justify the restriction for this particular employee.
Non-Solicitation vs. Non-Compete: An Important Distinction
Many states that restrict or ban employee non-competes still enforce non-solicitation agreements — restrictions that prevent employees from soliciting the employer's customers or employees, even if they can work for a competitor.
If you're in a state that limits non-competes, a well-drafted non-solicitation clause may give you most of the protection you were looking for. It's narrower, more defensible, and more likely to hold up in court.
Practical Tips for Drafting Enforceable Non-Competes
Use the narrowest scope that actually protects your interest. Courts don't reward overbreadth. A non-compete that's reasonable is more likely to be enforced than one that courts feel the need to "reform" — and in many states, reformation isn't even available.
Tie the restriction to the employee's actual role. The restriction should mirror what this employee actually does and knows — not every possible competitive activity.
Consider offering consideration beyond continued employment. In many states, a non-compete signed at the start of employment is valid. Mid-employment non-competes — where the only consideration is continued employment — face much more scrutiny. A signing bonus, promotion, or other benefit strengthens enforceability.
Include a choice of law provision thoughtfully. You can't simply choose California law to void a non-compete, or choose a more restrictive state's law to make an otherwise unenforceable restriction stick. Courts look at the relationship between the parties and the restriction when evaluating choice-of-law provisions.
Non-compete agreement enforceability questions are fact-specific and jurisdiction-dependent. But the framework above gives you the analytical structure to evaluate any restriction — and to draft one that will actually hold up.
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