Non-Compete Agreements in 2026: What's Still Enforceable and What Isn't
After the FTC's attempted ban and subsequent court challenges, what is the current legal status of non-compete agreements — and how should HR consultants be advising clients?
Where Things Stand After the FTC Rule Chaos
The FTC's 2024 rule banning most non-compete agreements generated significant attention — and significant legal challenge. Federal courts blocked the rule from taking effect nationally, and the legal landscape on non-competes is now a patchwork that requires state-by-state analysis rather than a single federal answer.
For fractional HR consultants, this means the question "is our non-compete enforceable?" requires a more nuanced answer than it did five years ago. Some states have effectively prohibited non-competes through legislation. Others enforce them broadly. Many fall somewhere in between, with enforceability depending on the role, compensation level, and specific language used.
This is one of the areas where the quality of your advice directly affects client outcomes — because a non-compete that isn't enforceable when the relationship matters most isn't just useless, it's a false sense of security.
States That Have Banned or Severely Limited Non-Competes
Several states have moved aggressively against non-compete enforcement in recent years:
California has prohibited employee non-competes since 1872. AB 2288 and SB 699 (2024) strengthened these protections significantly, making it unlawful to even enter into a non-compete agreement with a California employee, regardless of where the employer is located. California employers who include non-competes in offer letters or employment agreements now face exposure to civil penalties and employee claims.
Minnesota banned non-compete agreements for employees effective 2023. Non-competes signed by Minnesota employees after that date are void and unenforceable.
North Dakota, Oklahoma, and Montana have long had broad prohibitions on post-employment non-competes.
Colorado limits non-competes to earnings-threshold situations — employees earning less than $123,750 annually (indexed) cannot be bound by non-competes. Even above the threshold, only legitimate protection of trade secrets and confidential business information justifies enforcement.
Illinois prohibits non-competes for employees earning under $75,000 and requires that they be supported by at least 14 days for review.
New York has been moving toward prohibition, with legislation that has advanced in multiple sessions.
States Where Non-Competes Remain Broadly Enforceable
Florida enforces reasonable non-competes broadly and actually has a statute that restricts courts from refusing enforcement based on hardship to the employee. Texas, Georgia, and many other states enforce non-competes that are reasonable in scope, duration, and geographic reach — but require careful drafting to survive challenge.
What Makes a Non-Compete "Reasonable"
In states that enforce non-competes, courts typically evaluate:
Duration. Six months to one year is generally considered reasonable. Two years or more draws scrutiny. Non-competes extending five years or more rarely survive challenge outside unusual circumstances.
Geographic scope. A regional service business with a 50-mile radius restriction is defensible. A national restriction for a local sales employee is not. The geographic scope should map to the actual competitive territory.
Scope of restricted activity. A restriction on "any business in any industry" is overbroad. A restriction on "competitive activity in the specific service line where the employee worked" is more defensible.
Protectable interest. Most states require the employer to have a legitimate protectable interest — customer relationships, trade secrets, confidential business information, or specialized training. Courts don't enforce non-competes to simply prevent competition.
Consideration. In most states, a non-compete signed at the start of employment is supported by the offer of employment itself. Non-competes added later in the employment relationship require independent consideration — a raise, a promotion, a signing bonus. A non-compete that isn't supported by consideration when signed may fail regardless of other factors.
Practical Advice for Your Clients
Audit existing agreements. Many companies are using non-compete language that was drafted years ago and has never been updated for state law changes. A Non-Compete Analyzer can assess a specific agreement's enforceability risk given the applicable state and role. A non-compete agreement you gave to a California employee last year may expose you to civil penalties. One given to a Minnesota employee in 2022 may be unenforceable. Knowing what you have is the starting point.
Right-size the agreement to the risk. The employees who pose the most actual competitive risk — those with deep client relationships, proprietary process knowledge, or significant access to trade secrets — warrant the most carefully drafted restrictions. Blanket non-competes for all employees create unnecessary legal exposure and depress offer acceptance rates in competitive hiring markets.
Consider non-solicitation agreements instead. In many situations, a well-drafted non-solicitation of customers and employees agreement protects the legitimate business interest without the enforceability risk of a broad non-compete. Non-solicitation agreements are generally more enforceable and defensible.
Don't rely on choice-of-law provisions to avoid state bans. California courts will apply California law to California employees regardless of what the contract says. Minnesota's ban is similarly not contract-able around. Choice-of-law provisions do not override state prohibitions protecting their resident workers.
For clients with employees in multiple states — where different states' rules may apply simultaneously — see Multi-State Employment: The HR Compliance Complexity Nobody Warns You About.
The non-compete landscape will continue to evolve. The FTC's rulemaking attempt signaled significant federal interest in the issue even if the specific rule didn't survive. State legislatures continue to move. Agreements that are compliant today in a given state may not be next year — which is why periodic review of employment agreements should be part of your clients' regular HR calendar.