States That Refuse to Enforce a Non-Compete

Employees in states that void non-competes frequently believe the whole agreement has evaporated, and employers in those states frequently believe nothing has changed because their template says otherwise. Both are wrong in instructive ways. The prohibition is precise: it voids one category of covenant and leaves a set of neighboring obligations entirely intact.

What is voided

Post-employment restraints on working. The core prohibition targets covenants preventing a person from engaging in a lawful profession, trade or business after the employment relationship ends.

Regardless of how they are labeled. Statutes and courts look at effect rather than title. A clause called a non-solicitation, a garden leave provision or a forfeiture-for-competition term can be analyzed as a restraint if it operates as one.

Including in-term restraints in some formulations. A few statutes reach clauses restricting outside work during employment, though most are concerned with what happens afterwards.

And extending to choice-of-law workarounds. Several statutes expressly void provisions requiring another state's law or another state's forum for an employee who lives and works in the state, closing the route described in how far a non-compete travels.

Sometimes with a remedy attached. A number of statutes make presenting or attempting to enforce a void covenant unlawful in itself, with damages and fees available to the worker.

What survives

Sale-of-business covenants. The universal exception. A person selling a business, or their goodwill in it, may agree not to compete with the buyer, generally within a reasonable area and period. The reasoning is that the buyer paid for the goodwill and would receive nothing without it.

Partnership and membership dissolution covenants. Similar reasoning, applied to partners dissolving a partnership or members disposing of interests in a limited liability company.

Confidentiality obligations. A duty not to disclose or use confidential information is not a restraint on working and survives essentially everywhere, provided it is confined to information that is genuinely confidential.

Trade secret protection. This operates by statute rather than by contract, applies whether or not anything was signed, and is unaffected by the prohibition. Federal and state trade secret law both provide substantial remedies including injunctions.

Duties during employment. Loyalty, non-diversion of opportunities and the obligation not to compete while still employed continue until the relationship ends.

The contested middle

Customer non-solicitation. The most litigated category. Where the clause prevents an employee from serving customers they could otherwise serve, courts in some states treat it as a restraint in substance; in others it is upheld as a distinct and lesser restriction.

Employee non-solicitation. Generally treated more favorably, since it restrains recruitment rather than the person's own work, though a few states have questioned even this.

Forfeiture provisions. Clauses removing deferred compensation or equity if the employee competes. These do not prohibit the work but penalize it, and states differ on whether that is a restraint.

Training repayment agreements. Provisions requiring repayment of training costs on early departure have attracted attention as functional restraints where the amounts are large relative to earnings.

Garden leave. Paying an employee during a notice period in which they may not work elsewhere is treated favorably in several states precisely because the person is being compensated, and some statutes require it as a condition of enforceability.

What to do in practice

Employees: read the whole agreement, not just the covenant. The restraint may be void while the confidentiality clause is not. Understanding which obligations survive is what prevents a manageable situation becoming a trade secret claim.

And take nothing. Customer lists, pricing, technical material and internal documents are the subject of separate law that no state has voided. The single most common way a departing employee turns an unenforceable covenant into real liability is by copying files on the way out.

Employers: stop using one template nationally. In states with a presentation remedy, the template itself creates exposure across the whole workforce. State-specific versions are administratively dull and considerably cheaper.

And protect the interest rather than the person. Confidentiality, trade secret hygiene, customer contracts and reasonable non-solicitation obligations protect most of what a non-compete was doing, and they travel across state lines without collapsing.

Both: assume the employee's state decides. Every practical question in this area resolves faster once that assumption is made, and it is the same conclusion reached in whose wage and hour law covers a remote worker and in where the work is performed and why it decides.

It is worth understanding the policy argument behind these statutes, because it explains their shape and predicts how courts read the edges. The case for voiding employment non-competes rests on labor mobility: workers who can move freely between employers bid up their own wages, carry skills to where they are most productive, and start businesses of their own. States that have taken this route generally regard the resulting dynamism as an economic asset rather than as a concession to employees, which is why they treat the policy as fundamental and why they resist attempts to contract around it. That framing matters for interpretation, because a court reading a statute as protecting a public interest rather than a private one construes exceptions narrowly.

The counter-argument, which the enforcing states accept, is that employers who invest in training, client relationships and confidential systems need some protection against that investment walking out of the door, and that without it they will invest less. Both positions are respectable and the country has effectively run the experiment in parallel for decades. What matters for anyone caught in it is simply that the answer is a policy choice made by a legislature, not a proposition of general law — which is why looking it up is the first step and reasoning from principle is a waste of time.

One practical consequence deserves the last word. Because the states differ so sharply, the covenant an employee signs at the start of a job frequently reflects the law of a state they will not be working in three years later. Nobody revisits these documents. Employers file them and employees forget them, and both discover the mismatch at the moment of resignation, when there is no time to fix anything. Reading the agreement against the current state's rules once a year, or at least when moving, costs almost nothing and turns a shock into a plan. For an employee it is the difference between negotiating from a known position and resigning into an argument; for an employer it is the difference between a covenant that will be enforced and one that will merely be litigated at length and at expense. Neither party benefits from discovering the answer in a courtroom when it was available in a statute all along.