Non-compete agreements are among the most contentious documents in employment law. While they serve a legitimate purpose in protecting businesses from unfair competition, their enforceability varies dramatically from state to state. Understanding where and how non-competes are enforced is crucial for both employers drafting them and employees signing them.
At the federal level, the FTC has moved toward limiting non-compete agreements, though the legal landscape continues to evolve. At the state level, enforceability ranges from complete prohibition (as in California, which bans most non-competes) to strong enforcement (as in Florida, which has a statute presuming non-competes are valid). Most states fall somewhere in between, evaluating non-competes on a case-by-case basis.
Courts typically evaluate non-compete agreements based on reasonableness in three key areas: duration, geographic scope, and the scope of restricted activities. A non-compete lasting 6-12 months is generally considered reasonable, while agreements exceeding 2-3 years face increasing scrutiny. Geographic limitations should correspond to the employer's actual market area, and activity restrictions should be narrowly tailored to protect legitimate business interests.
Legitimate business interests that may justify a non-compete include protection of trade secrets, confidential business information, customer relationships, specialized training provided to the employee, and goodwill. A non-compete that merely prevents general competition without protecting a specific business interest is unlikely to be enforced.
Consideration is another essential element. For new employees, the job itself typically serves as sufficient consideration. For existing employees, courts in many states require additional consideration beyond continued employment—such as a promotion, raise, bonus, or access to new confidential information. Without adequate consideration, the non-compete may be unenforceable.
Some states follow the 'blue pencil' doctrine, which allows courts to modify overly broad non-competes rather than striking them down entirely. Other states take an all-or-nothing approach—if the non-compete is unreasonable, the entire agreement is void. Understanding which approach your state takes is important when drafting these agreements.
Recent trends show a movement toward greater restrictions on non-compete agreements. Several states have enacted laws limiting non-competes for low-wage workers, and some have implemented salary thresholds below which non-competes are prohibited. The trend is toward protecting worker mobility while still allowing reasonable protections for employers with legitimate interests.
If you're asked to sign a non-compete agreement, consider negotiating the terms before signing. Request narrower geographic and time restrictions, specific carve-outs for types of work you want to continue, and additional compensation in exchange for accepting the restrictions. If you're drafting a non-compete, work with an attorney familiar with your state's specific requirements to ensure enforceability.
