Will My Business's Non-Compete Hold Up?

Context Decides Almost Everything

The same words carry wildly different odds depending on why the covenant exists. Employment non-competes get the least deference and are increasingly banned outright: Ontario prohibits them for employees since October 2021 (bar genuine C-suite and sale-of-business exceptions), California voids them and since 2024 penalizes even attempting to enforce one, and US states like Minnesota, Oklahoma, and North Dakota ban most while Washington, Colorado, and Illinois void them below salary thresholds. The FTC's 2024 nationwide ban was struck down, so in the US it is state law, not federal, that governs.

Covenants tied to the sale of a business sit at the opposite end. Because the buyer is paying for goodwill and the parties bargained at arm's length, courts across Canada and the US enforce seller non-competes far more readily — even Ontario's and California's employee bans carve them out. Contractor and partner covenants fall in between. Before relying on any covenant, the first question is which of these buckets it belongs to, because that determines whether it is presumptively suspect or presumptively fine.

Reasonableness: Duration, Geography, Activity, and Interest

Where non-competes are allowed, they are enforced only as far as needed to protect a legitimate business interest — client relationships, trade secrets, or purchased goodwill. That means duration matched to how long the interest stays sensitive (roughly 12 months is the practical employment ceiling, and anything over 24 months is hard to defend), geography limited to the market actually served, and restricted activities confined to the person's real role. A clause with no geographic limit, a multi-year term, or a bar on work the person never did is textbook overbreadth.

Two doctrines then decide close cases. Consideration: a covenant added mid-relationship needs fresh value — a raise, bonus, promotion, or equity — because in many jurisdictions continued employment alone is not enough, and its absence can void the clause outright. Severance of overbroad terms: many US states will 'blue-pencil' an overbroad covenant down to something enforceable, but Canadian courts generally will not — the Supreme Court of Canada in Shafron v KRG Insurance held ambiguous or overbroad covenants simply fail. That makes drafting overreach fatal in Canada but sometimes survivable in the US.

Build Protection That Actually Survives

The durable core of protection is rarely the non-compete. Non-solicitation clauses (no poaching clients or staff) and confidentiality/NDA obligations protect specific interests without barring anyone from earning a living, so courts enforce them far more readily, and confidentiality survives even where every covenant fails — including under the US Defend Trade Secrets Act and Canadian trade-secret law. For junior and mid-level roles especially, a well-drafted non-solicit and confidentiality package is both safer and usually sufficient.

For businesses, the practical strategy is to draft the narrowest covenant that still protects a genuine interest, document the consideration, and always layer non-solicit and confidentiality terms underneath so the package holds even if the non-compete is voided. And before enforcing any covenant, get a jurisdiction-specific opinion: sending a demand letter to enforce a clause that is void — particularly in California — can itself create liability. This area of law changes quickly in both countries, so templates should be re-reviewed regularly.

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