What Is a Non-Compete Agreement?

A non-compete agreement (also called a covenant not to compete or restrictive covenant) is a contract clause that restricts an employee's ability to compete with their former employer after leaving.

Typical terms:

Time period — Usually 6 months to 2 years.

Geographic scope — A defined area (city, state, region).

Activity restriction — Working for a competitor, starting a competing business, or soliciting clients.

Enforceability. Courts evaluate non-competes based on whether they are reasonable in scope, duration, and geographic area, and whether they protect a legitimate business interest.

State variation:

California — Non-competes are generally unenforceable (Business and Professions Code § 16600).

Oklahoma, North Dakota, Minnesota — Also largely ban non-competes.

Many other states — Enforce non-competes if they are reasonable in scope.

FTC rule — The FTC attempted to ban most non-competes nationwide in 2024, but the rule was blocked by federal courts.

Legitimate business interests that may justify a non-compete:

Trade secrets and confidential information

Customer relationships and goodwill

Specialized training provided to the employee

When non-competes are less likely enforceable:

Overly broad geographic scope or duration

Applied to low-wage or non-specialized employees

No consideration provided (signing after employment began with nothing in return)

The employer fired the employee

Alternatives. Non-solicitation agreements (restricting client solicitation) and NDAs (protecting confidential information) are generally more enforceable than broad non-competes.

This is legal information, not legal advice.