Non-Compete Clause: Enforceability, the Reasonableness Test, and the FTC Backdrop

A non-compete clause bars someone from working for a competitor or starting a competing business for a set time within a set area after they leave. Whether it actually holds up has almost nothing to do with the words you write and almost everything to do with which state's law applies. The same clause that a Florida court may enforce is void in California, so the governing-law analysis comes before the drafting.

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

TL;DR

• A non-compete restricts post-departure competition by time, geography, and scope of activity. Courts enforce only what is reasonable on all three, and "reasonable" is defined by state law, not by your contract.
• Enforceability is state-by-state. California, Minnesota (agreements on or after July 1, 2023), North Dakota, and Oklahoma void most employee non-competes, and Wyoming does the same for contracts entered into on or after July 1, 2025, with exceptions. Washington voids nearly all non-competes from June 30, 2027. Other states bar them below a pay threshold. Florida writes presumptions of reasonableness into its statute.
• The FTC's 2024 rule to ban most non-competes nationwide is gone. A federal court set it aside in August 2024, the FTC dropped its appeals in September 2025, and the rule was removed from the Code of Federal Regulations effective February 12, 2026. Non-competes remain governed by state law. Do not draft as if a federal ban exists.
• A non-compete needs consideration, and what counts is a state-law question. Kentucky's Supreme Court held that an at-will employee who signed a covenant after 16 years on the job, with no promotion, raise, or training in return, received no consideration, so the covenant was unenforceable (Charles T. Creech, Inc. v. Brown, 433 S.W.3d 345 (Ky. 2014)). Illinois counts two years of continued employment, or other adequate consideration (820 ILCS 90/5). Washington requires independent consideration for a covenant signed after employment starts (RCW 49.62.020(1)(a)).
• The biggest review trap is a nationwide, indefinite, all-industry restriction. Overbroad terms get narrowed in some states (Texas and Florida require the court to reform them) and sink the whole covenant in others (Wisconsin).

What a non-compete clause actually does

A non-compete sits in three dimensions, and each one is independently tested for reasonableness.

Duration. How long the restriction lasts after departure. There is no national safe zone, but several statutes set benchmarks. Florida presumes a restraint of six months or less reasonable, and more than two years unreasonable, for a former employee (Fla. Stat. 542.335(1)(d)1). Massachusetts caps the restricted period at 12 months, or two years if the employee breached a fiduciary duty or took the employer's property (Mass. Gen. Laws ch. 149, 24L(b)(iv)). Washington presumes a covenant longer than 18 months unreasonable until nearly all non-competes become void on June 30, 2027 (RCW 49.62.020(2), 49.62.020(1) as amended by 2026 c 149).

Geography. Where the person cannot compete. This should track where the employer actually does business or where the employee actually worked, not a reflexive "anywhere in the United States." For a sales rep who covered three states, a nationwide ban is facially overbroad.

Scope of activity. What the person cannot do. A clause that bars "any role at any competitor" is weaker than one that bars the specific competitive function the person performed. Narrow scope is what makes the rest defensible.

The covenant is only enforceable to the extent it protects a legitimate business interest: trade secrets, confidential information, customer goodwill, or specialized training. A non-compete that just suppresses ordinary competition, with no protectable interest behind it, fails.

Why it matters: the dollars at stake

Suppose a VP of Sales signs a 24-month, nationwide non-compete, then leaves to join a direct competitor. The former employer sues for an injunction.

• If the governing law is Florida, a 24-month restraint is not presumed unreasonable (only more than two years is), so a court may enforce it, and must narrow an overbroad nationwide scope rather than throw it out (Fla. Stat. 542.335(1)(c), (d)). For an employee earning more than twice the county's annual mean wage who signed a covered agreement under the 2025 Florida CHOICE Act, the period can reach four years and a court must preliminarily enjoin the employee if the Act's conditions are met (Fla. Stat. 542.43, 542.45). The VP either sits out or fights an expensive injunction, and the new employer may rescind the offer rather than litigate.
• If the governing law is California, the non-compete is void and unenforceable regardless of where and when it was signed (Cal. Bus. & Prof. Code 16600.5(a)). An employer that tries to enforce it commits a civil violation, and the employee can sue for an injunction or actual damages and recover attorney's fees (16600.5(d), (e)).

Same clause, same facts. One state can deliver a lockout; the other delivers nothing and penalizes the attempt. This is an illustrative example, but it captures why the choice-of-law line is the most valuable sentence in the whole provision.

Who wants what

The employee's strongest move is often not to delete the clause but to narrow it to something a court would actually enforce, then make the employer pay for the restriction through garden leave.

Market-standard language

A defensible employee non-compete reads close to this. The bracketed terms are the negotiation:

NON-COMPETITION. During employment and for a period of [twelve (12)
months] after the termination of employment for any reason, Employee
will not, directly or indirectly, engage in or provide services
substantially similar to those Employee provided to the Company to any
business that competes with the Company in [the specific products /
services] within [the geographic territory in which Employee worked or
had responsibility during the last twenty-four (24) months]. This
restriction is limited to activities that would involve the use or
disclosure of the Company's Confidential Information or trade secrets.

Note what makes this version survivable: a moderate duration, geography tied to where the employee actually worked, scope tied to the actual role, and an express link to a legitimate interest (confidential information). The vaguer each term, the more a court will narrow or void it.

The negotiation: standard, fallback, walk-away

A clean compromise on a senior role is a shorter restriction backed by garden leave: the company pays the person their base salary during the restricted period in exchange for staying out. Massachusetts makes this structure part of its statute: the agreement needs a garden leave clause paying at least 50 percent of the employee's highest annualized base salary from the prior two years, or other mutually agreed consideration specified in the agreement (Mass. Gen. Laws ch. 149, 24L(b)(vii)). Elsewhere it is a negotiating tool, not a legal requirement.

Common carve-outs / variations

Non-competes rarely appear alone. The common variations and add-ons:

• Step-down or "blue pencil" language. Some clauses ask the court to reform an overbroad term to the maximum enforceable scope. This helps in states that require or allow reformation (Texas: the court "shall reform the covenant," but cannot award damages for conduct before reformation, Tex. Bus. & Com. Code 15.51(c); Florida: "a court shall modify the restraint," Fla. Stat. 542.335(1)(c)) and hurts you where the statute voids the whole covenant (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).
• Garden leave. A paid version of the restriction; trade money for enforceability.
• Tolling. The restricted period pauses while the person is in breach, so the clock does not run out during litigation.
• Sale-of-business non-compete. When a founder sells their company, the non-compete they sign is judged more leniently than an employee non-compete, because the buyer is paying for the goodwill. The statutes in the ban states say so expressly: California (Bus. & Prof. Code 16601), Minnesota (Minn. Stat. 181.988, subd. 2(b)(1)), North Dakota (N.D. Cent. Code 9-08-06(1)), and Wyoming (W.S. 1-23-108(a)(i)) all carve out sale-of-business covenants. Florida's presumptions are longer for sellers: three years or less is presumed reasonable and more than seven years unreasonable (Fla. Stat. 542.335(1)(d)3).

A narrower fallback that survives in more states:

The restriction in this Section applies only to (a) the specific line of
business in which Employee was personally involved during the final
twenty-four (24) months of employment and (b) the geographic territory
Employee personally serviced, and lasts for [twelve (12) months].

Jurisdiction and enforceability notes

Non-compete enforceability is the most state-dependent topic in commercial contracting. Hold these at the principle level and verify the controlling state every time:

• Some states void employee non-competes almost entirely. California is the headline example: every contract restraining a lawful profession, trade, or business is void to that extent, and the statute is to be read broadly, "no matter how narrowly tailored" (Bus. & Prof. Code 16600(a), (b)(1)). North Dakota voids restraints except sale-of-goodwill and dissolution covenants (N.D. Cent. Code 9-08-06). Oklahoma lets a former employee compete in the same or a similar business as long as the employee does not directly solicit the employer's established customers (Okla. Stat. tit. 15, 219A). Minnesota voids covenants not to compete entered into on or after July 1, 2023 (Minn. Stat. 181.988). Wyoming voids them for contracts entered into on or after July 1, 2025, with exceptions for executive and management personnel, trade secrets, sale of a business, and some training-cost recovery (W.S. 1-23-108). See our California non-compete breakdown and the state-by-state enforceability guide.
• Most states enforce reasonable covenants. The test is generally reasonableness in time, geography, and scope, tied to a legitimate business interest. Texas, for instance, enforces a covenant that is ancillary to an otherwise enforceable agreement and whose time, geography, and scope are reasonable and no greater than necessary to protect goodwill or another business interest (Tex. Bus. & Com. Code 15.50(a)); see our Texas non-compete guide.
• Salary thresholds and notice rules are spreading. Illinois voids a non-compete unless the employee's earnings exceed $75,000 ($45,000 for a non-solicit), stepping up to $80,000 and $47,500 on January 1, 2027 (820 ILCS 90/10). Until its ban takes effect on June 30, 2027, Washington requires earnings above an indexed threshold ($126,858.83 for employees in 2026; the statute's base is $100,000, adjusted annually) and written disclosure of the terms by the time the offer is accepted (RCW 49.62.020(1)). Virginia bars non-competes for low-wage employees and health care professionals (Va. Code 40.1-28.7:8(B)). Thresholds change often, so confirm the current figure at signing.
• The protectable interest usually rests on trade secrets or goodwill. Florida lists trade secrets, valuable confidential information, substantial customer relationships, goodwill, and extraordinary training as legitimate business interests and voids a covenant with none (Fla. Stat. 542.335(1)(b)). If the real concern is confidential information, a strong confidentiality and trade-secret regime often does the work; see trade secrets enforceability by state.
• The FTC rule is gone. State law controls.

This is general information, not legal advice for a specific deal, and enforceability turns on the governing law and the facts. Confirm against the controlling state's current law before you rely on any non-compete.

Review checklist: red flags to catch

• Nationwide geography when the person worked in one region.
• Duration over 12-24 months with no senior-role or trade-secret justification.
• "Any role at any competitor" scope rather than the specific function.
• Governing law set to a friendly state with no genuine connection to the employee or the work. California will not honor it: a void non-compete is unenforceable "regardless of where and when the contract was signed" (Bus. & Prof. Code 16600.5(a)).
• No new consideration for a current employee asked to sign mid-employment, in a state that requires it.
• No legitimate-interest hook (the clause just suppresses competition).
• A "ban exists" assumption based on the FTC rule, which was set aside and removed from the CFR.
• No garden leave or other agreed consideration where the state requires it (Massachusetts does), or on a senior restriction you want to defend.

How it interacts with other clauses

• Non-solicitation: the narrower restrictive covenant that often survives where a non-compete fails; many employers lead with it.
• Confidentiality: the legitimate interest that usually justifies the non-compete in the first place.
• Governing law: the single most outcome-determinative clause for a non-compete; pick it deliberately.
• Intellectual property: assignment of inventions often travels with the non-compete in employment agreements.
• Severability: controls whether an overbroad term gets reformed or sinks the whole covenant.

FAQ

Are non-competes enforceable? It depends entirely on the state. Most states enforce non-competes that are reasonable in duration, geography, and scope and that protect a legitimate business interest. California, Minnesota, North Dakota, Oklahoma, and (for newer contracts) Wyoming void most employee non-competes, and Washington will void nearly all of them from June 30, 2027.

Did the FTC ban non-competes? No. The FTC issued a rule in 2024 to ban most non-competes, but a federal court set it aside before the effective date, the FTC dropped its appeals in September 2025, and the rule was removed from the Code of Federal Regulations effective February 12, 2026. Non-competes are still governed by state law.

How long can a non-compete last? There is no universal limit. Statutes set the benchmarks: Florida presumes six months or less reasonable and more than two years unreasonable for a former employee, Massachusetts caps the period at 12 months (two years in two narrow cases), and Washington presumes more than 18 months unreasonable until its ban takes effect on June 30, 2027. Elsewhere a court asks whether the period is reasonable for the interest protected.

What makes a non-compete unenforceable? Overbroad terms (nationwide geography, indefinite duration, all-industry scope), the absence of a legitimate business interest, lack of consideration, or simply being in a state that voids them. Any one of these can sink the clause.

Can my employer enforce a non-compete if they fired me? Sometimes, depending on the state and the clause. Massachusetts excludes employees terminated without cause or laid off from its non-compete rules (Mass. Gen. Laws ch. 149, 24L(c)), and Virginia, under a 2026 amendment, makes a non-compete unenforceable if the employer discharges the employee without providing severance benefits or other monetary payment, unless the discharge is for cause; the payment must be disclosed when the covenant is signed (Va. Code 40.1-28.7:8(C)). Some clauses also limit enforcement to voluntary departures. Read the trigger language and check the governing law.

What is garden leave? Garden leave is a paid version of the restriction: the employer keeps paying the person, usually base salary, during the restricted period in exchange for staying out of the market. Massachusetts requires it, or other agreed consideration, for covered non-competes and sets the floor at 50 percent of the highest annualized base salary from the prior two years (Mass. Gen. Laws ch. 149, 24L(b)(vii)). Elsewhere it is a negotiated term.

Is a non-solicitation agreement the same as a non-compete? No. A non-solicit only bars going after specific customers or employees, while a non-compete bars competing at all. Non-solicits are narrower and survive in more states, which is why many employers rely on them instead.

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.