Are Non-Compete Agreements Enforceable? State Laws and the FTC Rule in 2026

Are non-compete agreements enforceable? In most US states, yes, but only if the non-compete is reasonable in duration, geography, and scope, and protects a legitimate business interest. Here is the headline 2026 update: the Federal Trade Commission's nationwide ban never took effect and has now been removed from the federal rulebook, so whether your non-compete holds up is decided state by state, the same way it was before the FTC ever got involved.

Last updated July 2026.

Are non-compete agreements enforceable?

In most states, a non-compete is enforceable if it is reasonable and protects a legitimate business interest such as trade secrets, confidential information, or customer goodwill. Four states void nearly all employee non-competes outright. Everywhere else, courts weigh how long the restriction lasts, how wide the geography is, and how broadly it limits your work.

That reasonableness test is where most fights are won or lost. An employer cannot simply block you from earning a living; it has to point to something worth protecting and then show the restriction is no broader than necessary to protect it. A blanket ban on working anywhere in the industry, for five years, across the whole country, tends to get struck down or narrowed. A tailored limit on soliciting the specific clients you served, for a year, is a much easier sell to a judge.

Are non-competes legal?

Non-competes are legal in the large majority of states, subject to reasonableness limits and, in many states, wage or salary thresholds and advance-notice rules. They are effectively unenforceable for most employees in California, Minnesota, North Dakota, and Oklahoma. So whether they are legal depends entirely on which state's law governs the agreement and, increasingly, on how much the worker earns.

More than a dozen states now bar non-competes for workers below a set income level, on the theory that lower-wage employees rarely hold the kind of sensitive information a non-compete is supposed to guard. Several of those states also require the employer to give the worker the agreement in advance, often before a job offer is accepted, so nobody signs away future options on their first day without time to read it.

What is a non-compete agreement?

A non-compete agreement is a contract in which a worker agrees not to work for a competitor, or start a competing business, for a set period and within a set area after leaving a job. It is one type of restrictive covenant, alongside non-solicitation clauses (no poaching clients or coworkers) and confidentiality clauses (no disclosing secrets).

Non-competes usually appear inside a broader employment contract, an offer letter, or a standalone restrictive-covenant agreement, and sometimes as a condition of a bonus, equity grant, or the sale of a business. The sale-of-business context matters: courts are far more willing to enforce a non-compete against someone who sold their company and got paid for the goodwill than against a rank-and-file employee.

Did the FTC ban non-compete agreements?

No. In April 2024 the FTC voted to issue a Non-Compete Clause Rule that would have banned most non-competes nationwide, but a federal court set the rule aside before it could take effect, and the FTC has since removed it from the Code of Federal Regulations. The agency now enforces case by case instead of through a blanket ban.

The timeline below tracks how a proposed national ban became, within two years, no rule at all. The short version: a Texas court held the FTC lacked the authority to issue the rule, the agency dropped its appeals, and by early 2026 the rule was formally struck from the books. What did not disappear is the FTC's power to challenge individual non-competes it considers unfair under Section 5 of the FTC Act, and it has signaled that healthcare employers and staffing firms are its top targets.

The agency has also opened a public inquiry into the scope and effects of employer non-competes and says it will keep enforcing case by case under Section 5, with healthcare and staffing under the most scrutiny. So while there is no national ban, employers in those sectors should not assume the FTC has walked away.

Which states ban non-compete agreements?

Four states void virtually all employee non-competes: California, Minnesota, North Dakota, and Oklahoma. Beyond those, more than a dozen states restrict non-competes by wage or salary threshold, and several require advance notice before the offer. Two more states, Virginia and Washington, have tightened their rules with changes taking effect in 2026 and 2027.

California's ban lives in Business and Professions Code section 16600, and 2024 amendments (SB 699 and AB 1076) went further: they reach agreements signed in other states and require employers to notify affected workers that their non-competes are void. Minnesota's ban, Minnesota Statutes section 181.988, applies to agreements entered into on or after July 1, 2023. North Dakota and Oklahoma round out the group of states where an employee non-compete is, as a practical matter, unenforceable.

Virginia and Washington are the ones to watch. Effective July 1, 2026, Virginia makes a post-termination non-compete generally enforceable only if the employer provides severance, unless the worker was fired for cause, and it largely prohibits non-competes for healthcare professionals except in a sale-of-business context. Washington's HB 1155, passed in 2026, voids most non-competes for Washington-based employees regardless of pay, with limited exceptions, and adds statutory damages, attorneys' fees, Attorney General enforcement, and a duty to notify workers that existing non-competes are void. One honest caveat: published trackers disagree on when the Washington law takes effect. DLA Piper reports June 30, 2027, while some trackers say June 30, 2026, so confirm the current effective date before you rely on it.

How long can a non-compete last?

There is no single legal maximum, because duration is judged for reasonableness under each state's law. As a practical pattern, courts look hardest at how long a non-compete lasts, and restrictions in the range of six months to two years are far more commonly upheld than longer ones. A five-year post-employment ban is a hard sell almost anywhere.

Treat any specific number as a guide, not a guarantee. A one-year non-compete for a senior salesperson with deep client relationships may be reasonable, while the same one-year term for an entry-level worker with no confidential access may not be. There is no reliable national average length to cite, and courts also weigh duration together with geography and scope: a short, narrow restriction survives challenges that a long, sweeping one does not.

Can you get out of a non-compete?

Often, yes. Non-competes are challenged and defeated regularly, either because the restriction is unreasonably broad, because the employer lacks a legitimate interest to protect, because the state bans or limits the clause, or because the contract was never properly supported by consideration. Some employers will also negotiate a release, especially when litigation looks expensive and uncertain.

Common exits include showing the geography or duration is broader than any real business need, showing you had no access to trade secrets or key customer relationships, relying on a state ban or wage threshold, pointing to a defect in how the agreement was signed or paid for, or negotiating a carve-out on your way out the door. Because outcomes turn on state law and the exact wording, this is a place where a short consultation with an employment lawyer usually pays for itself.

Does a non-compete have to be signed to be enforceable?

A non-compete is a contract, so it generally has to be agreed to, whether by signature or other clear assent, and in many states it must be supported by consideration. In some states, continued employment alone is not enough consideration for a non-compete signed after hiring; the employer has to give something extra, like a raise, bonus, or promotion.

That is why how the agreement gets signed, and what the employer offered in exchange, can decide the whole case. An unsigned draft with no proof the worker ever agreed is weak. A clearly signed agreement, dated, with a record of what the employee received for signing, is much harder to escape. Getting that record right is where the signing process itself starts to matter.

Getting the agreement signed and on record

Whatever a non-compete says, an employer can only enforce what it can prove the worker actually agreed to. An electronically signed non-compete is valid under the federal ESIGN Act and state UETA laws, the same as ink on paper, and in a dispute the audit trail (who signed, when, and from what IP address) is frequently the thing that settles the argument. For the background on why electronic signatures hold up, see our guide on whether electronic signatures are legally binding.

For the practical side of collecting a valid, timestamped signature, SignSend handles both the non-compete agreement electronic signature workflow and the broader employment contract electronic signature process, so the restrictive-covenant language and the offer it came with are captured together with a clean record of assent.

What employers should do now

With the FTC rule gone but state law tightening, the sensible move is to audit existing agreements rather than assume old templates still work. Check the governing-law and notice requirements for every state where you employ people, confirm your durations sit in the defensible range, and make sure lower-wage or newly hired staff are not signing restrictions that a threshold or notice statute now voids. If hundreds of signed agreements are sitting in a shared drive, pulling the restrictive-covenant language out of each one is a document data extraction job, not a weekend of reading. Once you know what you have, narrow the overbroad clauses and re-paper anything that no longer complies, capturing fresh consideration where the state requires it.

This is general information, not legal advice. Non-compete law changes fast and varies by state, so confirm with an employment lawyer in your state before you rely on any of this.