A contract that restricts an employee from working for a competitor or starting a competing business for a period after leaving.
A non-compete agreement restricts a worker from working for competitors or starting a competing business for a specified time period after leaving a company. They're used by employers to protect trade secrets, customer relationships, and competitive advantage.
Enforceability varies dramatically by state. California, North Dakota, Minnesota, and a handful of other states largely ban non-competes — they're simply not enforceable against employees. In most other states, non-competes are enforceable but only if they're reasonable in scope, duration, and geographic area. Courts won't enforce a non-compete that's so broad it prevents someone from earning a living in their field.
The FTC attempted to ban most non-competes nationwide in 2024, though litigation has challenged this rule and the legal landscape is in flux. For employees, it's worth understanding whether any non-compete you're asked to sign is enforceable in your state and getting legal advice before signing one that could limit your future options. For employers, non-competes in states that won't enforce them provide false security; invest in other forms of protection like proper NDAs and IP assignments instead.