NDA vs Non-Compete vs Non-Solicit: Which Restrictive Covenant Do You Need?

An NDA protects information. A non-compete restricts where someone can work. A non-solicitation restricts who they can approach (your customers or your employees) after they leave. Three tools, three problems. The expensive mistake in-house teams make is reaching for a non-compete to do a job an NDA or non-solicit could do. They then discover the non-compete is void in the employee's state, and the narrower protection was never drafted.

Reviewed and corrected on 12 October 2026. This is general information, not legal advice; check the cited statute or opinion before relying on it.

If you want the foundation, start with what an NDA is and how confidentiality works. This post assumes that and goes to the harder question: given a specific person in a specific state, which covenant (or combination) is worth drafting.

Official text, as of 12 October 2026

Two statutes show why the three covenants are treated differently.

Minnesota, Minn. Stat. 181.988, subd. 1(a) (effective July 1, 2023, for agreements entered into on or after that date), read on the Minnesota Revisor's site:

"A covenant not to compete does not include a nondisclosure agreement, or agreement designed to protect trade secrets or confidential information."

The same definition also excludes a nonsolicitation agreement. Subdivision 2 then makes a covenant not to compete "void and unenforceable," with exceptions for the sale of a business and the dissolution of a business.

Washington, RCW 49.62.020 as amended by 2026 c 149 (effective June 30, 2027), read on the Washington Legislature's site:

"Beginning on June 30, 2027, all noncompetition covenants are void and unenforceable regardless of when the parties entered into the noncompetition covenant."

Washington's definition of a noncompetition covenant also leaves out a nonsolicitation agreement, a confidentiality agreement, and a covenant prohibiting use or disclosure of trade secrets, and the legislature's findings say nonsolicitation agreements "are not prohibited."

What changed in 2026: the FTC removed its non-compete rule from the Code of Federal Regulations on February 12, 2026, Washington enacted its ban, and the annual pay thresholds in Washington, Colorado and Oregon reset.

TL;DR

• NDA / confidentiality: protects defined information. Courts generally enforce a reasonable one, but the federal Speak Out Act and state statutes limit what an NDA can cover, and a missing federal whistleblower notice costs an employer remedies.
• Non-solicitation: bars poaching customers and/or employees. Some states carve it out of their non-compete bans (Minnesota, Washington), some set a pay floor (Illinois, Colorado), and California treats it with suspicion.
• Non-compete: bars working for competitors. Void for most employees in California, Minnesota, Oklahoma and North Dakota, and for contracts entered into since July 1, 2025 in Wyoming (with exceptions). Washington voids all of them from June 30, 2027. Gated by pay thresholds in Washington, Colorado, Illinois, Oregon, and others.
• No federal ban. The FTC's 2024 non-compete rule was set aside in court, the FTC dropped its appeal in September 2025, and the rule was removed from the CFR in February 2026. Enforceability is a state-law question.
• They stack. Many agreements pair an NDA with a customer non-solicit and keep the non-compete for the exceptions.
• Choose by role, state, and access, not by habit.

NDA vs non-compete vs non-solicit: the practical difference

Each covenant answers a different question, and each faces a different legal test.

The three are not interchangeable. New York's test asks whether a restraint is "no greater than is required for the protection of the legitimate interest of the employer," whether it imposes undue hardship on the employee, and whether it is injurious to the public, and a violation of any prong invalidates the covenant (BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999)). Texas asks the same kind of question in statute: the limits must not "impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee" (Tex. Bus. & Com. Code 15.50(a)). If an NDA and a customer non-solicit would have protected the interest, a broader non-compete is harder to defend under those tests.

The 2026 legal backdrop: no federal ban, and state law that keeps moving

For a stretch of 2024 it looked like non-competes might be banned nationwide. The FTC's final rule (89 FR 38342) would have barred new non-competes from September 4, 2024 and made most existing ones unenforceable, although existing non-competes with senior executives could stay in force. The rule never took effect. In Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), the court held that the FTC acted in excess of its statutory authority and that the rule was arbitrary and capricious, and it set the rule aside. On September 5, 2025, the Commission voted 3 to 1 to dismiss its appeals and accept the vacatur, and a final rule removed 16 CFR part 910 from the CFR effective February 12, 2026 (91 FR 6507). There is no federal non-compete ban. Enforceability is a state-law question.

State law is where the action is, and it splits three ways.

Bans. California voids "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind" to that extent (Business and Professions Code section 16600(a)), and section 16600(b)(1) says to read the statute broadly, in line with Edwards v. Arthur Andersen LLP, to void any employment non-compete "no matter how narrowly tailored" unless an exception applies. Minnesota voids covenants not to compete entered into on or after July 1, 2023. North Dakota voids restraints on a lawful profession, trade or business except for the sale of goodwill and certain partner, member and shareholder agreements on dissolution or dissociation (N.D. Cent. Code 9-08-06). Oklahoma lets a former employee compete in the same or a similar business so long as the employee does not "directly solicit the sale of goods, services or a combination of goods and services from the established customers of the former employer" (Okla. Stat. tit. 15, section 219A). Wyoming voids most covenants not to compete in contracts entered into on or after July 1, 2025, with exceptions for the sale of a business, trade secrets, training and relocation cost recovery on a sliding scale, and executive and management personnel and their professional staff (W.S. 1-23-108). Washington joins them on June 30, 2027. In these states budget your protection around the NDA and a permitted non-solicit.

Pay-threshold gates. A growing group of states enforces non-competes only above an income floor, and the floors rise most years. Verify the number on the day you sign.

• Washington: earnings must exceed $126,858.83 in 2026 (Department of Labor & Industries), until the 2027 ban.
• Colorado: $130,014 for 2026 (Colorado Department of Labor and Employment order), with a customer non-solicit floor of 60 percent of that figure, $78,008.40, plus a trade-secret purpose and advance written notice (C.R.S. 8-2-113).
• Oregon: salary and commissions above $119,541 for 2026, a 12-month limit, and written notice at least two weeks before employment starts or a bona fide advancement (ORS 653.295, BOLI).
• Illinois: earnings above $75,000 for a non-compete and $45,000 for a non-solicit, rising to $80,000 and $47,500 on January 1, 2027 (820 ILCS 90/10).
• Massachusetts: no flat number. A non-compete cannot be enforced against an employee classified as nonexempt under the FLSA or one terminated without cause or laid off, it is capped at 12 months (24 for a fiduciary breach or taking employer property), and it needs a garden leave clause or other mutually agreed consideration (G.L. c. 149, section 24L).

Below the threshold, the non-compete is void whatever the drafting. This is easy to miss when a template travels from a headquarters state to a lower-paid role in a threshold state.

Reasonableness states. Elsewhere, courts test the covenant for reasonableness. New York uses the BDO Seidman test above. Texas enforces a covenant that is "ancillary to or part of an otherwise enforceable agreement" and reasonable in time, geography and scope. Florida's statute presumes a restraint of six months or less reasonable and one over two years unreasonable for a former employee (Fla. Stat. 542.335(1)(d)1). Which state's law applies depends on where the employee works and lives, which is why that state, not the company's home state, has to drive the draft.

Practitioner judgment calls

The rules are only half the job. These are the calls that decide whether a covenant helps you or just sits there looking protective.

When a customer non-solicit beats a non-compete. If the real risk is a departing salesperson taking accounts, a customer non-solicit scoped to the accounts the person actually serviced is a narrower restraint than a non-compete, so it fits the "no greater than necessary" tests better. It also survives the Minnesota and Washington bans, which leave non-solicits outside their definitions. California is the exception. In Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), the California Supreme Court rejected the Ninth Circuit's "narrow-restraint" exception and held invalid a clause barring the employee from serving clients he had worked with. The court said it was not deciding whether a "trade secret exception" to section 16600 exists. A California relationship risk points you to a tight NDA and a trade-secret program, and you should not assume a non-solicit will hold.

When an employee non-solicit still creates California risk. In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), the Court of Appeal held a clause barring former travel-nurse recruiters from soliciting the employer's employees void under section 16600, and doubted that an older case allowing such clauses (Loral Corp. v. Moyes) survived Edwards. The holding was about recruiters, so it is not a rule for every employee, but it is a reason not to treat an employee non-solicit as the safe fallback in California.

When continued employment is or is not enough consideration. For a covenant signed at hire, the job offer is the consideration. For an existing employee, states diverge, so do not assume "you still have a job" is enough. Illinois defines adequate consideration as two years of work after signing or other adequate consideration beyond a period of employment (820 ILCS 90/5), and a covenant without it is void (section 15). Massachusetts requires, for a covenant signed after employment starts, "fair and reasonable consideration independent from the continuation of employment" and 10 business days' notice (section 24L(b)(ii)). Washington requires independent consideration for a covenant entered into after employment starts (RCW 49.62.020(1)(a)(ii)). In Texas the covenant must be ancillary to an otherwise enforceable agreement, and the Supreme Court has held that the relationship between that agreement and the interest being protected must be reasonable (Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011)). Confidential information the employer actually provides can supply it (Alex Sheshunoff Management Services v. Johnson, 209 S.W.3d 644 (Tex. 2006)), and so can stock options tied to goodwill (Marsh). If you are rolling covenants out to current staff, pair them with a raise, bonus, equity or promotion.

When a sale-of-business non-compete belongs in its own bucket. A non-compete tied to selling a business is treated differently from an employee one. California allows a seller of goodwill, or an owner disposing of an ownership interest, to agree not to carry on a similar business in a specified area (section 16601). Minnesota's ban has an exception for covenants agreed during the sale of a business (181.988, subd. 2(b)(1)). Delaware courts review these covenants under a "less searching" inquiry than an employment covenant, but they still require a fit with the buyer's legitimate interest. In Kodiak Building Partners, LLC v. Adams (Del. Ch. Oct. 6, 2022) the Court of Chancery denied a preliminary injunction because the covenants protecting all of the buyer's business lines were broader than its interest in the purchased assets, and it declined to enforce only the supportable parts. Keep the covenant in the purchase agreement, tie it to the goodwill, and size it to what the buyer actually bought.

A covenant-selection framework

Choosing well means walking a specific set of inputs before you pick a clause.

1. Role and access. Is this person client-facing, technical, or executive? A recruiter with no customer accounts needs different protection than a sales lead or a principal engineer with source-code access.
2. State of work and residence. Run the employee's state first, then yours. A ban state (California, Minnesota, North Dakota, Oklahoma, Wyoming for contracts since July 1, 2025, and Washington from June 30, 2027) ends the non-compete question for an ordinary employee before you start. A threshold state ends it below the pay floor.
3. Trade-secret access. Real access to secrets is the strongest legitimate interest. No secret access usually means an NDA plus a customer non-solicit is your ceiling.
4. Customer control. Did this person own the relationship, or just support it? Scope any non-solicit to accounts they actually serviced.
5. Compensation level. Compare pay against the state threshold before you draft. Below it, the non-compete is void and you are back to NDA plus non-solicit.
6. Consideration. New hire? The offer covers it. Existing employee? Add real consideration and check Illinois, Massachusetts and Washington specifically.
7. Duration and geography. There is no universal number. Massachusetts and Oregon cap a non-compete at 12 months, Washington presumes a duration over 18 months unreasonable (RCW 49.62.020(2)), and Florida presumes six months or less reasonable and more than two years unreasonable for a former employee. Keep geography no wider than where the person actually operated.
8. What happens to an overbroad clause. The state decides. In Texas the court "shall reform the covenant," but cannot award damages for conduct before reformation (15.51(c)). In Florida, a court "shall modify the restraint" (542.335(1)(c)). In Wisconsin, an unreasonable covenant is "illegal, void and unenforceable even as to any part of the covenant or performance that would be a reasonable restraint" (Wis. Stat. 103.465). In a Wisconsin-style state, over-drafting can lose you the protection entirely, so draft to survive, not to intimidate.

Run those inputs and many situations resolve to an NDA plus a scoped customer non-solicit. The non-compete enters only for senior, high-access roles in states that still enforce them, above any pay threshold, and even then it should be as narrow as the interest allows.

Three quick walkthroughs show how the same instinct produces different clauses:

• California sales rep leaving with CRM access. The non-compete is void under section 16600, and the customer non-solicit is at serious risk after Edwards. Your enforceable core is a tight NDA plus a claim based on the misuse of the customer data itself. Do not paper over it with a non-solicit you may not be able to enforce.
• Washington mid-level engineer earning below the threshold. The non-compete is void because the pay does not clear the 2026 figure, even though the engineer has real source-code access, and every Washington non-compete is void from June 30, 2027 anyway. Protect the code with a strong NDA and invention-assignment terms, and use a customer non-solicit only if it fits (an engineer usually has no customers to solicit).
• Minnesota founder selling a company. A non-compete agreed during the sale of a business is within the statute's exception if it is "temporary and geographically restricted" to a reasonable area and length of time. Keep it in the purchase agreement, tied to the goodwill, and out of any side employment agreement.

A drafting checklist for the covenant you land on

Before you sign or send, walk the clause-level issues. These are drafting practice, not legal rules, except where a statute is cited.

• Definition of confidential information: specific and bounded, with the standard exclusions (public, independently developed, already known, lawfully received from a third party).
• Whistleblower notice: an employer agreement with an employee that governs trade secrets or other confidential information should carry the notice of immunity under 18 U.S.C. 1833(b). Without it, the employer "may not be awarded exemplary damages or attorney fees" in a Defend Trade Secrets Act action against that employee (1833(b)(3)(C)).
• Harassment and discrimination carve-outs: under the Speak Out Act (42 U.S.C. 19403(a)), a nondisclosure or nondisparagement clause agreed to before a sexual harassment or sexual assault dispute arises is not judicially enforceable where the conduct alleged violates federal, tribal or state law. See NDA enforceability by state for the state statutes.
• Residuals carveout: present or absent by design, not by accident; it changes how much the NDA protects.
• Customer scope: limited to accounts the person serviced or learned about, not the entire book.
• Employee-solicit scope: limited to staff the person worked with, and check the state before relying on it in California.
• Duration and geography: inside the limits above, and no broader than where the person actually operated.
• Consideration: identified and adequate, especially for covenants signed after hire.
• Notice or garden leave: required for a non-compete in Massachusetts, Oregon, Colorado and Washington in different forms (garden leave, advance written notice, a separate signed notice, written disclosure at the offer).
• Severability: drafted for your state's rule on overbroad clauses (reform, modify, or void).

For the clause mechanics, see the non-compete clause breakdown, the non-solicitation clause breakdown, and the confidentiality clause breakdown.

FAQ

What is the difference between an NDA and a non-compete? An NDA protects confidential information: it stops someone from disclosing or misusing defined secrets. A non-compete restricts where and for whom a person can work after they leave. Different purpose, and many states restrict the non-compete far more because it limits someone's ability to earn a living.

What is the difference between a non-compete and a non-solicitation? A non-compete bars working in the field or for competitors at all. A non-solicitation only bars going after your specific customers or employees. Some states leave non-solicits outside their non-compete bans (Minnesota and Washington both do), though California treats even non-solicits with suspicion.

Can you use all three together? Yes, and senior-employee agreements often do. An NDA protects information, a non-solicit protects relationships, and a non-compete (where allowed) protects against direct competition. Scope each to its own interest, because in a state like Wisconsin an unreasonable covenant is void as a whole.

Which restrictive covenant is the most enforceable? There is no single ranking, because it depends on the state. An NDA aimed at real confidential information is the least restricted, though statutes limit what it can cover. A non-compete is the most restricted, and is banned or pay-gated in a growing list of states.

Are non-competes still enforceable in 2026? It depends on the state, because there is no federal ban. The FTC's 2024 rule was set aside in Ryan, LLC v. FTC, the FTC dropped its appeal in September 2025, and the rule was removed from the CFR on February 12, 2026. Non-competes are void for most employees in California, Minnesota, Oklahoma and North Dakota, in Wyoming for contracts since July 1, 2025 (with exceptions), and in Washington from June 30, 2027. They are gated by pay thresholds in Washington, Colorado, Illinois, Oregon, and others. Check current state law before relying on one. See non-compete enforceability by state.

Is a non-solicitation agreement enforceable? It depends on the state. In Illinois it must clear a $45,000 earnings floor, in Colorado a floor of 60 percent of the non-compete threshold, and in California it is at risk after Edwards and AMN Healthcare. Where it is allowed, scope it to customers or employees the person actually worked with.

Do I need a non-compete to protect my customer list? Often not. A customer list is usually better protected by an NDA, trade-secret law and a customer non-solicit scoped to serviced accounts, and those still operate in states where the non-compete is void. Check the employee's state first.

For more, see what an NDA is, the NDA vs confidentiality agreement explainer, and non-compete enforceability by state.

For the US statutes, regulations and court rules these laws sit in, see the US primary law API.

Arshita Anand

Co-Founder & CEO · Attorney

Arshita leads product and strategy at Vaquill AI, the US primary law data API. As an attorney, she decides which law we carry, how each section is sourced and cited, and what legal AI and compliance teams need from the data.