Non-compete agreements: what workers need to know in 2025

Updated: December 2025

You sign the paperwork on your first day. You're excited about the job. Buried in the stack is a non-compete agreement—a clause that says if you leave this company, you can't work for a competitor for one or two years, sometimes anywhere in the country. You sign it because you need the job. Most people do.

Two years later, you want to leave. A better opportunity comes along. But that non-compete sits in your file, and your current employer sends a letter threatening to sue. Your new job offer disappears. You're trapped.

This is the reality for an estimated 30 million American workers. One in five employees has signed a non-compete agreement, according to Federal Trade Commission research. These agreements suppress wages across entire industries—not just for those who sign them, but for everyone in that labor market. The FTC estimated that banning non-competes would increase worker earnings by $300 billion annually.

In April 2024, the FTC tried to ban most non-competes nationwide. That rule was blocked by federal courts in Texas and Florida, and in September 2025, the FTC abandoned its appeal. The nationwide ban is dead. But state laws continue to evolve, courts continue to strike down abusive agreements, and workers have more options than they realize.

This guide explains the current legal landscape, your rights in different states, real cases where workers prevailed, and exactly what you can do if an employer tries to enforce a non-compete against you.

The federal non-compete ban: what happened

The FTC rule of April 2024

On April 23, 2024, the Federal Trade Commission voted 3-2 to finalize a rule banning most non-compete clauses in employment contracts. The rule, published in the Federal Register at 89 FR 38342, would have:

•Prohibited employers from entering new non-compete agreements with any worker
•Made existing non-competes unenforceable for workers below "senior executive" level (those earning more than $151,164 annually with policy-making authority)
•Required employers to notify workers that existing non-competes were no longer enforceable
•Taken effect September 4, 2024

The Commission's analysis found that non-competes constitute an "unfair method of competition" under Section 5 of the FTC Act. The rule projected that eliminating non-competes would:

•Increase new business formation by 2.7% (approximately 8,500 additional new businesses annually)
•Increase average worker earnings by $524 per year
•Reduce healthcare costs by $74 billion to $194 billion over ten years
•Generate 17,000 to 29,000 more patents annually

Ryan LLC v. FTC: the Texas challenge

Hours after the FTC announced the rule, Ryan LLC, a Texas tax services firm, filed suit in the U.S. District Court for the Northern District of Texas (Case No. 3:24-cv-00986). The U.S. Chamber of Commerce and other business groups joined as plaintiff-intervenors.

On July 3, 2024, Judge Ada Brown issued a preliminary injunction preventing the rule from taking effect against the named plaintiffs, finding they were likely to succeed on the merits.

On August 20, 2024, Judge Brown issued a final ruling setting aside the entire rule nationwide. The court held that:

•The FTC lacks substantive rulemaking authority to issue broad rules defining "unfair methods of competition"
•Even if the FTC had such authority, the rule was "arbitrary and capricious" because it was "unreasonably overbroad without a reasonable explanation"

The court found that while the FTC can bring individual enforcement actions against specific non-competes, Congress never granted it authority to issue sweeping rules banning an entire category of business practice.

The Florida injunction

Meanwhile, in Properties of the Villages, Inc. v. FTC (Case No. 5:24-cv-00316, M.D. Fla.), Judge Timothy Corrigan issued a separate preliminary injunction on August 14, 2024, blocking the rule as applied to that plaintiff.

The appeal and withdrawal

The FTC appealed the Ryan LLC decision to the Fifth Circuit Court of Appeals (No. 24-10951). However, after the change in administration, the newly constituted Commission voted 3-1 on September 4, 2025, to dismiss the appeal and accept the district court's ruling.

FTC Chairman Andrew Ferguson stated that while the rule was "legally unviable," the Commission would "continue to enforce the antitrust laws aggressively against noncompete agreements" through individual enforcement actions. The Fifth Circuit formally dismissed the appeal on September 8, 2025.

What this means for workers

The federal ban is gone. There is no nationwide prohibition on non-compete agreements. Employers can continue to require workers to sign them, subject to state law limitations.

However, three things remain true:

•State laws still restrict non-competes. Four states ban them almost entirely. Many others limit them for low-wage workers or specific professions.

•The FTC can still take enforcement action. The Commission announced it will pursue case-by-case enforcement against abusive non-competes. On September 4, 2025—the same day it dropped the appeal—the FTC filed a complaint against Gateway Services for requiring all 1,800 of its employees to sign one-year non-competes.

•Courts regularly invalidate overbroad non-competes. Even without a federal ban, courts apply state law to strike down agreements that are unreasonable in scope, duration, or geographic reach.

State laws: where non-competes are banned or restricted

States with full or near-total bans

California

California has banned non-compete agreements since 1872. Business and Professions Code Section 16600 states that "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."

In 2023, the legislature strengthened this protection with two new laws effective January 1, 2024:

•SB 699 makes it unlawful for any employer to enter into or attempt to enforce a non-compete against a California employee, even if the agreement was signed in another state. It creates a private right of action allowing workers to sue for injunctive relief, actual damages, and attorney's fees.

•AB 1076 requires employers to notify current and former employees in writing by February 14, 2024, that any non-compete clauses in their contracts are void.

California courts have created a narrow exception allowing non-competes when necessary to protect trade secrets, but employers rarely prevail on this argument.

Minnesota

Minnesota banned non-competes effective July 1, 2023, under Minn. Stat. § 181.988. The law voids any covenant not to compete entered into on or after that date, with exceptions for:

•Agreements made in connection with the sale or dissolution of a business
•Agreements for the protection of trade secrets
•Non-solicitation agreements (which remain enforceable)

The ban is not retroactive—non-competes signed before July 1, 2023, remain enforceable under prior law.

North Dakota

North Dakota Century Code § 9-08-06 has long prohibited non-competes, with limited exceptions for the sale of a business goodwill or dissolution of a partnership.

Oklahoma

Oklahoma Statutes Title 15 § 219A prohibits non-competes except in the sale of a business or dissolution of a partnership. However, employers can still restrict former employees from soliciting the employer's established customers.

States with significant restrictions

Colorado

Colorado's C.R.S. § 8-2-113 (amended effective August 2022) makes non-competes void except for:

•Executive or management personnel, professional staff, or officers/employees who constitute administrative personnel
•Workers earning above the "highly compensated" threshold (updated annually—$127,091 in 2025)
•Agreements necessary to protect trade secrets
•Agreements relating to purchase/sale of a business

The law requires employers to give notice of non-compete terms before employment begins or 14 days before the agreement takes effect, whichever comes first. Violating the law is a misdemeanor.

Non-solicitation agreements have a lower threshold: $76,254.60 in 2025 (60% of the non-compete threshold).

Illinois

The Illinois Freedom to Work Act (820 ILCS 90/) prohibits non-competes for employees earning $75,000 or less (threshold increases in 2027). The law also:

•Requires employers to advise employees in writing to consult an attorney before signing
•Provides at least 14 calendar days to review the agreement before signing
•Makes unenforceable any non-compete entered during a period of furlough, layoff, or reduction in hours

Washington

Washington's RCW 49.62 (amended June 2024) voids non-competes for:

•Employees earning less than $116,594 annually (adjusted annually)
•Independent contractors earning less than $291,484 annually
•Any agreement that does not include a garden leave clause (continued payment during the restricted period)

The law caps non-compete duration at 18 months and requires employers to disclose the terms in writing no later than the time of acceptance of the job offer.

Oregon

Oregon's ORS 653.295 restricts non-competes to employees who:

•Earn above the median household income for a family of four ($108,319 in 2025)
•Have access to trade secrets or other competitively sensitive confidential information
•Are provided a signed, written copy at least two weeks before employment or at the time of a bona fide advancement

Non-competes are limited to 12 months duration.

Massachusetts

Massachusetts General Laws Chapter 149 § 24L requires:

•Garden leave compensation (at least 50% of base salary) or other mutually agreed consideration
•Maximum duration of 12 months
•Non-competes cannot be enforced against non-exempt employees, students, employees terminated without cause, or workers who are laid off

States with income thresholds

Several states prohibit non-competes below certain income levels:

| State | Income threshold | Notes | |-------|-----------------|-------| | Colorado | $127,091 (2025) | Updated annually | | Illinois | $75,000 | Increases in 2027 | | Maine | 400% of federal poverty level | Approximately $62,400 for individual | | Maryland | $15/hour or $31,200/year | Plus additional restrictions | | Nevada | Paid hourly without benefits | Narrow restriction | | New Hampshire | Hourly employees | With exceptions | | Oregon | $108,319 (2025) | Median family income | | Rhode Island | Non-exempt employees | Under FLSA | | Virginia | $72,850 (2025) | Low-wage threshold | | Washington | $116,594 employees (2025) | Updated annually |

Healthcare worker protections

Many states have enacted specific protections for healthcare workers, recognizing that non-competes in healthcare can harm patient access to care:

•Indiana limits physician non-competes
•Iowa protects mental health professionals and nurses
•Kentucky restricts non-competes for healthcare staffing entities
•South Dakota extends protections to physical therapists, pharmacists, counselors, and other professionals

Real cases: when workers won

Gateway Services: FTC enforcement action (2025)

Parties: Federal Trade Commission v. Gateway Services, Inc. and Gateway US Holdings, Inc.

What happened: Gateway is the largest pet cremation business in the United States, operating over 100 locations and servicing 17,000 veterinary clinics. Starting in 2019, Gateway required all newly hired employees to sign one-year non-competes prohibiting them from working in the pet cremation industry anywhere in the U.S.

These agreements applied to everyone—not just executives, but hourly workers who operated crematories and transported deceased pets from veterinary clinics. The company even responded to a new competitor entering one market by requiring all employees in that area to sign non-competes.

Outcome: On September 4, 2025, the FTC filed a complaint alleging the non-competes violated Section 5 of the FTC Act. Gateway agreed to a consent order requiring it to:

•Immediately stop enforcing all existing non-competes
•Provide written notice to all current and former employees that they are no longer bound
•Refrain from entering new non-compete agreements (with limited exceptions)

The order freed approximately 1,800 employees from these restrictions. The Commission voted 2-0 to approve the final order on November 25, 2025.

Source: FTC Press Release, "FTC Approves Final Order Prohibiting Noncompete Enforcement by Gateway Services" (November 25, 2025)

Sunder Energy v. Jackson: Delaware Supreme Court (2024)

Parties: Sunder Energy, LLC v. Tyler Jackson, et al.

What happened: Tyler Jackson was a founder of Sunder Energy, a solar sales company. As a minority member holding incentive units, he was required to sign an operating agreement containing a non-compete clause.

The non-compete prohibited Jackson and his "affiliates" from engaging in any door-to-door sales business in markets where Sunder operated or anticipated operating. The restriction lasted for two years after Jackson ceased to own incentive units—but Jackson couldn't freely transfer those units. Only Sunder could decide when to purchase them, meaning the non-compete potentially lasted indefinitely.

Jackson was sent the agreement on New Year's Eve with instructions to sign before midnight. He had no opportunity to negotiate, consult an attorney, or review the terms meaningfully.

When Jackson left to join Solar Pros, a competitor, Sunder sued to enforce the non-compete.

Outcome: The Delaware Court of Chancery refused to enforce the agreement, finding it "ridiculously broad"—as written, it would have prevented Jackson's daughter from selling Girl Scout cookies door-to-door. The court also declined to "blue pencil" (narrow) the agreement to make it enforceable.

On December 10, 2024, the Delaware Supreme Court affirmed. The court held that:

•Delaware courts have discretion to refuse to blue-pencil overbroad agreements
•Jackson had no bargaining power when signing (New Year's Eve deadline)
•Jackson received no meaningful compensation for the restriction (his incentive units were later repurchased for $0 under "bad leaver" provisions)
•Employers are incentivized to draft reasonable restrictions from the outset

Source: Sunder Energy, LLC v. Jackson, 332 A.3d 472 (Del. 2024)

J.O. Mory, Inc.: NLRB finding of unfair labor practice (2024)

Parties: J.O. Mory, Inc., Case Nos. 25-CA-309577, 25-CA-336995

What happened: J.O. Mory is a family-owned HVAC company in Indiana operating since 1892. The company required employees to sign agreements containing both non-compete and non-solicitation clauses.

David McClure, a union organizer, obtained employment at J.O. Mory with the intention of organizing workers there. He signed the employee agreement, which included the restrictive covenants. When McClure revealed his union affiliation to management, he was terminated the next day.

The NLRB General Counsel alleged that the non-compete and non-solicitation clauses themselves—not just their enforcement against McClure—violated Section 7 of the National Labor Relations Act by chilling employees' rights to organize.

Outcome: On June 13, 2024, Administrative Law Judge Sarah Karpinen ruled that the non-compete and non-solicitation provisions constituted unfair labor practices under the Stericycle standard.

The ALJ found the non-compete was so "ridiculously broad" it would have prevented an employee from encouraging a family member to patronize a competitor. The non-solicitation clause required employees to report on their own protected activities.

This was the first time an NLRB judge ruled that these types of clauses are per se unfair labor practices.

Note: In February 2025, NLRB Acting General Counsel William Cowan rescinded the Biden-era memos declaring non-competes presumptively unlawful, reflecting the Trump administration's different enforcement priorities. The legal status of this approach remains uncertain.

Source: J.O. Mory, Inc., JD-36-24 (NLRB ALJ Decision, June 13, 2024)

Jimmy John's: state attorney general enforcement (2016)

Parties: State of Illinois and State of New York v. Jimmy John's Enterprises LLC

What happened: Jimmy John's, the sandwich chain, required low-wage workers—sandwich makers, delivery drivers—to sign non-compete agreements prohibiting them from working at any business selling "submarine, hero-type, deli-style, pita, and/or wrapped or rolled sandwiches" within two miles of any Jimmy John's location in the United States for two years after leaving.

These workers earned close to minimum wage. They had no access to trade secrets or confidential business information. The non-competes existed purely to limit their job mobility.

When workers tried to leave for competitors, Jimmy John's threatened litigation. One worker was blocked from accepting a job at significantly higher wages.

Outcome: In June 2016, the Illinois Attorney General filed suit claiming the non-competes were unconscionable. The New York Attorney General announced a settlement the same month.

Under the settlement, Jimmy John's agreed to:

•Stop including non-compete clauses in hiring packets for low-wage workers
•Notify all current and former employees that their non-competes were unenforceable
•Notify all franchisees to rescind existing non-competes
•Pay $100,000 for education and outreach on non-compete best practices

New York Attorney General Eric Schneiderman stated: "Noncompete agreements for low-wage workers are unconscionable. They limit mobility and opportunity for vulnerable workers and bully them into staying with the threat of being sued."

Source: NY Attorney General Press Release, "A.G. Schneiderman Announces Settlement With Jimmy John's" (June 22, 2016)

Prudential Security: FTC consent order (2023)

Parties: FTC v. Prudential Security, Inc. (FTC Docket No. C-4800)

What happened: Prudential Security, a Michigan-based security guard company, required all employees—including low-wage security guards—to sign non-competes. When employees tried to leave for competitors offering higher wages, Prudential sued them and the competing companies.

Even after a Michigan state court determined that Prudential's non-competes were unreasonable and unenforceable under state law, the company continued requiring all new employees to sign identical agreements.

Outcome: In January 2023, the FTC announced a consent order requiring Prudential to:

•Stop enforcing its existing non-compete agreements
•Notify all current and former employees that their non-competes are void
•Stop requiring any employee to sign a non-compete

This case marked one of the FTC's first enforcement actions specifically targeting non-competes, preceding the broader rulemaking effort.

Source: FTC Press Release, "FTC Cracks Down on Companies That Impose Harmful Noncompete Restrictions on Thousands of Workers" (January 4, 2023)

How courts evaluate non-competes

When an employer tries to enforce a non-compete and the matter reaches court, judges typically evaluate several factors to determine enforceability.

Geographic scope

A non-compete limited to a specific city or region where the employee actually worked is more likely enforceable than one covering an entire state or the whole country. The Gateway Services case illustrates the problem: prohibiting pet cremation workers from working anywhere in the United States bore no relationship to the geographic scope of their actual work.

Duration

Courts generally view one year as reasonable, two years as potentially reasonable depending on circumstances, and anything longer as suspect. Some states cap duration by statute (Washington: 18 months; Oregon and Massachusetts: 12 months).

Scope of restricted activity

An agreement preventing a worker from doing the exact same job for a direct competitor differs from one preventing all work in an entire industry. The Jimmy John's agreements failed this test—barring sandwich makers from working anywhere food is assembled in bread is absurd.

Consideration

In some states, continued employment is sufficient consideration for a non-compete signed at hiring. In others, a non-compete signed by an existing employee requires additional consideration—a bonus, promotion, raise, or other benefit. The Sunder Energy case turned partly on this: Jackson received incentive units that were later worth nothing, providing no meaningful compensation for his restricted freedom.

Protectable interest

Non-competes should protect legitimate business interests: trade secrets, confidential customer information, specialized training provided by the employer. Courts question agreements that don't protect any identifiable interest—like preventing a delivery driver from delivering sandwiches for a competitor.

Employee's role

Courts scrutinize non-competes more closely when applied to low-wage workers who lack access to genuinely confidential information. An executive with knowledge of business strategy, customer pricing, and product roadmaps has different information than a front-line worker.

What to do if you're facing a non-compete

Before you sign

•Read the agreement carefully. Many workers sign without reading. Know what you're agreeing to before you sign.

•Ask about the scope. What activities are restricted? What geographic area? How long? Get specifics in writing.

•Negotiate. Non-competes are often negotiable. Ask for a shorter duration, narrower geographic scope, or specific carve-outs for certain types of work.

•Check your state law. If you're in California, Minnesota, North Dakota, or Oklahoma, most non-competes are void regardless of what you sign. In other states, check whether you're below any income threshold that makes non-competes unenforceable.

•Get something in return. If you're an existing employee asked to sign a non-compete, ask for additional compensation—a signing bonus, raise, or promotion. This strengthens your bargaining position and may be legally required in some states.

•Consult an attorney. If the job is significant and the non-compete is substantial, spend a few hundred dollars to have an employment lawyer review it. It's cheaper than fighting an enforcement action later.

If you want to leave

•Get a copy of your agreement. Request your personnel file or the original signed document. You need to know exactly what you agreed to.

•Analyze enforceability. Consider:
•What state law applies?
•Is the scope reasonable?
•Did you receive adequate consideration?
•Does your employer have a legitimate interest to protect?

•Consider what you'll do next. Working for a direct competitor in the same role triggers different concerns than starting your own business in a related field or working in a different capacity.

•Don't assume it's enforceable. Many employers include non-competes they know are unenforceable, hoping the threat alone will deter employees from leaving. The document in your file may be worthless.

•Don't assume it's unenforceable. Conversely, don't bet your livelihood on a non-compete being invalid without professional advice. The cost of being wrong can include losing your new job and owing damages to your former employer.

•Consult an employment attorney. This is worth the investment before you make a move that could trigger litigation.

If your employer threatens enforcement

•Don't panic. A threatening letter is not a lawsuit. Many employers send cease-and-desist letters hoping the threat alone will work.

•Preserve all documents. Keep copies of your non-compete, any communications about it, your job duties, and evidence of the circumstances when you signed.

•Document the overbreadth. If the non-compete is unreasonably broad, document specific examples of how it would restrict legitimate activities.

•Check for procedural defects. Did you receive proper notice? Was adequate consideration provided? Did the employer comply with state-specific requirements (like California's notice requirement)?

•Consider negotiation. Sometimes employers will agree to narrow the scope or waive enforcement in exchange for other commitments—non-disparagement, non-solicitation of specific clients, or a brief transition period.

•Get legal representation. If a lawsuit seems imminent, you need an attorney. Many employment lawyers handle these cases on contingency or flat fee arrangements.

Filing a complaint

If you believe your employer has violated state law regarding non-competes, you may have several options:

California: File a complaint with the Labor Commissioner or bring a private lawsuit under SB 699 for injunctive relief, actual damages, and attorney's fees.

Colorado: Report violations to the Colorado Attorney General. Threatening to enforce an unenforceable non-compete is a misdemeanor.

NLRB: If the non-compete interferes with your right to organize or engage in protected concerted activity with coworkers, file an unfair labor practice charge at nlrb.gov.

FTC: Report abusive non-compete practices at reportfraud.ftc.gov. The Commission has requested public feedback specifically on non-compete enforcement.

State attorney general: Many state AGs have consumer protection or labor divisions that investigate employer practices. The Jimmy John's case resulted from state AG enforcement.

Industry-specific impacts

Non-competes affect different industries in different ways. Understanding your industry's specific patterns can help you negotiate better or challenge enforcement.

Technology and software

Silicon Valley's success is often attributed partly to California's non-compete ban. Engineers can move freely between companies, spreading ideas and expertise across the industry. Research by economists Ronald Gilson and others has shown that California's approach contributed to the region's innovation advantage over Route 128 in Massachusetts, where non-competes were enforceable.

Tech workers in states that enforce non-competes often face:

•Restrictions on joining any "competitor," broadly defined
•Claims that general programming skills are proprietary
•Non-competes covering open-source contributions or side projects
•Pressure to sign as a condition of unvested stock options

If you're in tech, pay attention to how "confidential information" is defined. General knowledge of how to build software isn't a trade secret, even if your employer trained you.

Sales and business development

Sales professionals face some of the most aggressive non-compete enforcement because their customer relationships are valuable. A salesperson who moves to a competitor may take clients with them.

Courts generally allow restrictions on soliciting customers you personally worked with. What they scrutinize more closely:

•Blanket restrictions on working in any sales capacity
•Geographic restrictions broader than your actual territory
•Restrictions lasting longer than typical sales cycles in your industry
•Definitions of "customer" that include people you never contacted

If your role is genuinely relationship-based, expect some restrictions. But restrictions that prevent you from selling entirely, rather than just protecting specific relationships, may be challenged.

Finance and professional services

Banking, accounting, consulting, and law firms frequently use non-competes for client-facing professionals. These industries often have legitimate concerns about client relationships and confidential business information.

However, some restrictions go too far:

•Preventing professionals from practicing their profession at all
•Restrictions covering clients you never worked with
•Geographic restrictions covering areas where you have no client contact
•Durations exceeding what's necessary to transition client relationships

Professional licensing boards in some states have weighed in against non-competes for professionals like accountants and financial advisors, arguing that client access to qualified professionals outweighs employer interests.

Healthcare

See the detailed discussion below. Healthcare non-competes raise unique concerns because they affect patient access to care, not just worker mobility and employer interests.

Hospitality and food service

The Jimmy John's case exposed how absurd non-competes had become in food service. Sandwich makers earning minimum wage had no trade secrets worth protecting. The non-competes existed solely to limit worker mobility and suppress wages.

States increasingly ban non-competes for low-wage workers precisely because of cases like Jimmy John's. If you work in hospitality or food service and earn below your state's threshold, your non-compete is likely void—but check your state's specific rules.

Broadcasting and media

Non-competes in broadcasting are particularly controversial because they can prevent journalists and on-air personalities from working in their home markets after leaving a station. Some states have responded:

•Maine has proposed legislation limiting broadcast non-competes
•California's ban applies to broadcasting like any other industry
•Several stations have modified practices after public pressure

If you're in broadcasting, document any attempts to enforce a non-compete that would force you to leave your market. These cases often attract media attention and regulatory scrutiny.

The healthcare crisis

Non-competes create particular problems in healthcare. Approximately 45% of primary care physicians are bound by non-compete agreements, according to research cited by the FTC. In a system already facing physician shortages, these agreements:

•Force doctors to move their practices outside their patient communities rather than join a local competitor
•Prevent patients from continuing care with trusted providers
•Reduce competition in healthcare markets, contributing to higher costs
•Exacerbate shortages in underserved areas

The Health Resources and Services Administration projects that over 70% of primary care health professional shortage areas are in rural or partially rural regions. When a rural hospital or clinic can prevent its physicians from practicing within a 50-mile radius for two years after departure, patients lose access to care.

Several states have responded with healthcare-specific restrictions:

•Connecticut limits physician non-competes to one year and allows physicians to notify patients of their new location
•Delaware caps physician non-competes at two years and prohibits enforcement against specialists in underserved areas
•Indiana, Iowa, Kentucky, and South Dakota have various protections for healthcare workers

The FTC specifically requested public input on non-competes in healthcare in its September 2025 Request for Information, signaling continued regulatory interest in this area.

The data on harm

The FTC's rulemaking compiled extensive evidence on the economic effects of non-competes:

Wage suppression

•The FTC estimated that banning non-competes would increase worker earnings by $300 billion annually
•Average individual worker earnings would increase by $524 per year
•Non-competes suppress wages even for workers who are not themselves bound by one, because they reduce overall labor market competition

Reduced mobility

•Workers bound by non-competes stay in jobs 11% longer than they would otherwise
•This represents reduced opportunity, not increased job satisfaction
•Workers who want to leave but can't exercise less leverage in salary negotiations

Business formation

•Greater enforceability of non-competes reduces new firm formation by approximately 12%
•The FTC projected that banning non-competes would create 8,500 additional new businesses annually
•Non-competes prevent workers from starting competing businesses, reducing entrepreneurship

Innovation

•The FTC projected 17,000 to 29,000 additional patents annually if non-competes were banned
•Research shows innovation rates are higher in states where non-competes are unenforceable
•Silicon Valley's growth is often attributed partly to California's ban on non-competes

Who is affected

A Government Accountability Office study (GAO-23-103785) found:

•18% of labor force participants are currently bound by non-competes
•38% have agreed to at least one at some point in their career
•Non-competes are more common in high-skill, high-paying jobs
•But 14.4% of workers earning below median wages have signed non-competes
•Non-competes are even found in states where they are unenforceable, because employers rely on the chilling effect of the threat

What comes next

With the federal ban dead, the legal landscape will continue to develop along several paths:

State legislation. Expect more states to enact restrictions. In 2025 alone, Virginia and Wyoming passed new restrictions, and bills are pending in New York, Ohio, Texas, Washington, and other states. Michigan has introduced legislation that would ban non-competes entirely.

FTC enforcement. The Commission will continue pursuing individual enforcement actions against the most abusive practices. The Gateway Services case demonstrates this approach—targeting employers who impose blanket non-competes on low-wage workers across entire industries.

NLRB action. While the Biden-era memos were rescinded, the underlying legal theory—that non-competes can chill protected concerted activity—remains available. Individual regional offices may continue bringing cases.

State court decisions. Courts will continue applying state law to invalidate overbroad agreements. The Sunder Energy decision provides a template: courts should not blue-pencil badly drafted restrictions to make them enforceable, because doing so rewards employers for overreaching.

Private litigation. In states like California with private rights of action, workers can sue employers who include non-competes in employment agreements. This shifts enforcement from regulators to workers and their attorneys, creating new incentives for compliance.

Alternatives employers use instead of non-competes

When non-competes are restricted or banned, employers often turn to other restrictive covenants. Understanding these alternatives helps you know what you're signing and whether it's enforceable.

Non-solicitation agreements

Non-solicitation agreements prohibit former employees from soliciting the employer's customers or employees for a period after departure. These come in two forms:

Customer non-solicitation prevents you from contacting customers you worked with to bring their business to your new employer. These are generally more enforceable than non-competes because they're narrower—you can still work for a competitor, you just can't actively poach your former employer's clients.

Employee non-solicitation prevents you from recruiting former colleagues to join you at a new employer. Some courts have found these enforceable when they're limited to employees you actually worked with, but overbroad versions (preventing you from encouraging anyone to leave) face challenges.

Minnesota, despite banning non-competes, explicitly permits non-solicitation agreements. In Colorado, non-solicitation agreements are enforceable only for workers earning above $76,254.60 (2025 threshold).

Non-disclosure agreements (NDAs)

Non-disclosure agreements protect confidential information and trade secrets. Unlike non-competes, they don't restrict where you can work—they restrict what information you can share or use.

A typical NDA prohibits you from:

•Disclosing customer lists, pricing data, or business strategies
•Using proprietary methods or processes learned at your former employer
•Sharing technical specifications or product development plans

NDAs are enforceable in all states when they protect genuinely confidential information. However, NDAs that are so broad they effectively prevent you from using general skills and knowledge can be challenged.

California's approach is instructive: while the state bans non-competes, it permits NDAs protecting actual trade secrets under the California Uniform Trade Secrets Act. The line between enforceable trade secret protection and unenforceable restriction on working for competitors is where many disputes occur.

Garden leave clauses

Garden leave (also called "gardening leave") requires an employer to continue paying you during the non-compete period. You remain on the payroll but don't work.

Several states now require garden leave for non-competes to be enforceable:

•Massachusetts: At least 50% of base salary during the restriction period
•Washington: Garden leave is required for non-competes to be enforceable

Garden leave shifts the cost of restriction from worker to employer. If a company has to pay you for six months of non-competition, it thinks harder about whether the restriction is worth it.

Assignment of inventions clauses

Many employment agreements include clauses assigning any inventions or intellectual property you create during employment to the employer. Some go further, claiming ownership of inventions created for a period after departure or unrelated to your job duties.

State laws limit these clauses:

•California (Labor Code § 2870): Employers cannot require assignment of inventions developed entirely on your own time without using company resources, unless the invention relates to the employer's business
•Delaware, Illinois, Minnesota, North Carolina, Washington, and other states have similar protections

Clawback and repayment provisions

Increasingly, employers use "stay-or-pay" provisions that require workers to repay training costs, signing bonuses, or other compensation if they leave within a certain period.

For example:

•"If you leave within 2 years, you must repay the $5,000 signing bonus"
•"Training costs of $15,000 will be deducted from your final paycheck if you resign within 18 months"
•"Tuition reimbursement must be repaid if you leave within 3 years of receiving it"

These provisions can function like non-competes by making departure prohibitively expensive. The NLRB General Counsel's May 2023 memo (subsequently rescinded) treated certain stay-or-pay provisions as presumptively unlawful when they "reasonably tend to chill employees" from exercising Section 7 rights.

Some states regulate these provisions:

•California prohibits most training repayment agreements except in limited circumstances
•Connecticut restricts repayment requirements for healthcare workers
•Several states are considering legislation on these "TRAP" (Training Repayment Agreement Provisions) clauses

Red flags in non-compete agreements

When reviewing a non-compete, watch for these warning signs that the agreement may be overbroad or unenforceable:

Scope red flags

•"Any business that competes with the Company" - Undefined competition can mean anything
•"The United States" or "worldwide" geographic scope - Rarely justified for most workers
•Restriction on work "directly or indirectly" - Could prohibit even tangentially related work
•Coverage of "affiliates" - The Sunder Energy case showed how this can sweep in family members
•Industry-wide restrictions - Prohibiting work for "any company in the [industry]"

Duration red flags

•More than two years - Even one year is long for most positions
•Indefinite duration tied to events you don't control - Like Sunder's provision lasting until the company chose to buy back shares
•No reasonable relationship to your actual role - A receptionist doesn't need a 3-year non-compete

Consideration red flags

•Presented after you've already started working - May lack adequate consideration
•Rushed signing with no review period - Like the New Year's Eve signing in Sunder Energy
•No additional compensation for existing employees - Required in some states
•"Continued employment" as the only consideration - May be insufficient depending on state

Enforcement red flags

•Automatic injunction provisions - Purporting to grant the employer automatic court relief
•Liquidated damages far exceeding actual harm - $100,000 penalty clauses for receptionist non-competes
•Attorney fee shifting only to employer - You pay their legal costs but they don't pay yours
•Out-of-state governing law - Attempting to avoid your state's worker protections

Timeline of major developments

Understanding how we got here helps predict where non-compete law is heading.

1872: California enacts Business and Professions Code § 16600, making non-competes void.

March 2016: U.S. Treasury Department publishes report finding non-competes harm workers and the economy.

May 2016: White House report calls for limiting non-compete abuse.

June 2016: Jimmy John's settles with Illinois and New York attorneys general, agreeing to stop using non-competes for low-wage workers.

2017: Illinois Freedom to Work Act takes effect, banning non-competes for workers earning under $13/hour (later increased).

August 2022: Colorado's strengthened non-compete law takes effect, including criminal penalties for violations.

January 2023: FTC files enforcement actions against Prudential Security and two other companies.

July 1, 2023: Minnesota's non-compete ban takes effect.

September 2023: California enacts SB 699 (private right of action) and AB 1076 (notice requirement).

January 1, 2024: California's strengthened protections take effect; employers must notify workers their non-competes are void.

February 14, 2024: Deadline for California employers to send required notices.

April 23, 2024: FTC votes 3-2 to ban most non-competes nationwide.

July 3, 2024: Texas federal court issues preliminary injunction in Ryan LLC v. FTC.

August 14, 2024: Florida federal court issues separate injunction in Properties of the Villages v. FTC.

August 20, 2024: Texas court sets aside FTC rule nationwide.

June 13, 2024: NLRB ALJ rules non-compete is unfair labor practice in J.O. Mory case.

September 4, 2025: FTC dismisses appeal; simultaneously files Gateway Services enforcement action.

September 8, 2025: Fifth Circuit formally dismisses FTC appeal.

November 25, 2025: FTC finalizes consent order against Gateway Services.

December 10, 2024: Delaware Supreme Court affirms refusal to enforce overbroad non-compete in Sunder Energy.

February 2025: NLRB Acting General Counsel rescinds Biden-era non-compete memos.

Frequently asked questions

Can my employer sue me for violating a non-compete?

Yes. Even if the non-compete is ultimately unenforceable, your employer can file a lawsuit. Defending that lawsuit costs money and time. Many employers count on this chilling effect—they know the non-compete won't hold up in court, but they also know that most workers can't afford to find out.

That said, if the non-compete is clearly invalid under state law (like any non-compete in California), courts may award you attorney fees for having to defend the frivolous action.

What happens if I just ignore my non-compete?

If your former employer decides to enforce it, they typically file a lawsuit seeking:

•Injunctive relief: A court order forcing you to stop working for the competitor
•Damages: Money for the harm they claim you caused
•Attorney fees: In some cases, you may have to pay their legal costs

Courts can issue temporary restraining orders quickly, potentially forcing you out of your new job within days of the lawsuit being filed. If you violate an injunction, you can be held in contempt of court.

However, many employers don't sue. Litigation is expensive, and an employer that loses a non-compete case may have to pay your attorney fees in some jurisdictions. The decision to enforce depends on the employer's resources, the perceived harm, and their assessment of whether the non-compete is enforceable.

Does it matter that I'm in a "at-will" state?

At-will employment (meaning either party can end employment at any time) doesn't affect non-compete enforceability directly. You can quit whenever you want, but the non-compete restricts what you can do after quitting.

However, some states have linked non-compete enforceability to how employment ends. Massachusetts, for example, prohibits enforcement against workers who are terminated without cause or laid off.

My new employer said they'd "handle" my non-compete. Is that enough?

Be cautious. Your new employer saying they'll defend you is not a guarantee. Ask specifically:

•Will they pay for your legal defense?
•Will they indemnify you against any damages you're ordered to pay?
•What happens if they lose or decide to settle?

Get these commitments in writing. If your new employer loses the lawsuit or decides the legal fees aren't worth it, you could be left holding the bag.

Can I move to California to escape my non-compete?

California's SB 699 voids non-competes against California employees regardless of where the agreement was signed. If you become a California employee, the non-compete is likely unenforceable against you for work in California.

However, the analysis gets complicated when you work remotely, your former employer is in another state, or the non-compete has a choice-of-law provision selecting another state's law. Courts are still working out how California's law applies to workers who relocate.

What about non-competes for independent contractors?

Non-competes for independent contractors are common in certain industries (consulting, freelancing, professional services). State laws often treat contractor non-competes differently than employee non-competes.

Washington, for example, sets a higher income threshold for contractor non-competes ($291,484 in 2025 vs. $116,594 for employees). The theory is that highly paid contractors have more bargaining power.

However, if you're classified as an independent contractor but treated like an employee (misclassification), you may be able to challenge the non-compete on those grounds.

Can a non-compete survive if my employer sells the business?

Usually yes. Non-competes typically bind you to the company and its successors and assigns. When a business is sold, the buyer often acquires the right to enforce existing non-competes.

However, some courts have found that a change in business ownership can affect enforceability, especially if the nature of the business changes substantially or the non-compete was tied to a specific relationship that no longer exists.

My non-compete says it's governed by Delaware law, but I work in California. Which applies?

Choice-of-law provisions don't always control. California courts have consistently held that California's public policy against non-competes applies to California employees regardless of what law the contract specifies.

A Texas employer can't avoid California's ban by putting a Texas choice-of-law clause in an agreement with a California employee. However, for employees in states that do enforce non-competes, choice-of-law provisions may matter.

How long do I need to wait before the non-compete expires?

The restriction period typically starts when your employment ends. If your non-compete says "12 months after termination," the clock starts running on your last day of work.

Some non-competes have ambiguous language about when the restriction starts. Review yours carefully—and note that some states cap duration regardless of what the agreement says.

Resources

Government agencies

•Federal Trade Commission: ftc.gov (file complaints at reportfraud.ftc.gov)
•National Labor Relations Board: nlrb.gov
•U.S. Department of Labor: dol.gov
•Your state labor department: varies by state
•Your state attorney general: naag.org (directory)

Legal help

•National Employment Lawyers Association: nela.org (directory of plaintiff-side employment attorneys)
•Workplace Fairness: workplacefairness.org
•Your state bar association: lawyer referral services
•Law school clinics: many law schools offer free employment law clinics

Research and advocacy

•Economic Policy Institute: epi.org
•Economic Innovation Group: eig.org (maintains state non-compete law tracker)
•Treasury Department: Non-Compete Contracts report (March 2016)

State-specific resources

•California: Labor Commissioner at dir.ca.gov
•Minnesota: Department of Labor and Industry at dli.mn.gov
•Colorado: Department of Labor and Employment at cdle.colorado.gov
•Illinois: Department of Labor at labor.illinois.gov

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This guide provides general information about non-compete agreements and is not legal advice. Non-compete law varies significantly by state and is changing rapidly. The enforceability of any specific agreement depends on its terms, the circumstances when it was signed, and applicable state law. Consult with an employment attorney in your state for advice on your specific situation.

Last updated: December 2025

Non-Compete Agreements: What Workers Need to Know in 2025