Which US states ban non-compete agreements?
Several states void non-compete agreements entirely or nearly entirely: California (Bus. & Prof. Code §16600), North Dakota (NDCC §9-08-06), Oklahoma (15 O.S. §217), and Minnesota (effective January 1, 2023). The FTC issued a rule banning most non-competes federally in 2024, though that rule faced legal challenges. In all other states, non-competes are generally enforceable if reasonable in scope, duration, and geographic area, and protect a legitimate business interest.
What makes a non-compete enforceable in the US?
In states that permit non-competes, courts assess: (1) whether the agreement protects a legitimate business interest (trade secrets, confidential customer relationships, proprietary processes); (2) whether the duration is reasonable (1–2 years is common; longer periods face greater scrutiny); (3) whether the geographic scope is reasonable (limited to the area where the employee actually worked); and (4) whether the restriction is limited to activities the employee actually performed. Some states 'blue-pencil' (narrow) overbroad clauses; others void them entirely.
Can a new employer be liable for a non-compete breach?
Yes. Under the tort of 'tortious interference with contractual relations,' a new employer who knowingly hires an employee in violation of a valid non-compete can be sued by the former employer for damages. Prudent employers conduct due diligence to ensure new hires are not bound by enforceable non-competes. Some companies provide indemnification to new hires who face non-compete litigation.