Non-Compete Agreements in 2026: Are They Enforceable?

Non-compete agreements are still enforceable in most US states in 2026, but only if they are reasonable and comply with a fast-growing set of state rules. The FTC's nationwide ban never took effect and was formally abandoned in 2025, so state law now decides the question. A handful of states ban non-competes outright, many void them for workers below a salary threshold, and several passed new restrictions in 2026, so the answer depends on where the worker lives and works and how much they earn.

For a small business owner, the practical question is whether a non-compete is worth the legal risk, or whether confidentiality and non-solicitation agreements protect you better. This guide explains the current federal position, summarizes key state rules with 2026 thresholds, works through real-world scenarios and covers the alternatives.

What happened to the FTC non-compete ban?

In April 2024 the Federal Trade Commission adopted a rule that would have banned most non-compete agreements nationwide. In August 2024 a federal district court in Texas set the rule aside, so it never took effect. In September 2025 the FTC voted to dismiss its appeals and accept that decision. The agency has said it will instead pursue specific non-competes it considers anticompetitive on a case-by-case basis, so unusually broad agreements, especially for lower-wage workers, can still draw federal attention.

Are non-compete agreements enforceable? State rules in 2026

State law varies enormously. This Mayer Brown review of recent non-compete law summarizes the 2025 and 2026 changes. Key examples:

State	Rule	Key detail
California	Broad ban	Most non-competes void; AB 692, effective January 1, 2026, also targets "stay-or-pay" repayment terms
Minnesota	Ban	Non-competes signed from July 1, 2023 are void, with sale-of-business exceptions
North Dakota, Oklahoma	Long-standing bans	Limited exceptions, such as sale of a business
Washington	Income threshold now; full ban from June 30, 2027	2026 employee threshold about $126,859; ESHB 1155 voids all non-competes from mid-2027 and requires notice to affected workers
Wyoming	Broad ban for agreements from July 1, 2025	Exceptions include executives, management and professional staff, and sale of a business
Colorado	Void below high-earner threshold	Allowed only for highly compensated workers (about $130,000 in 2026) to protect trade secrets, with notice rules
Oregon	Salary threshold and limits	2026 threshold $119,541; maximum 12 months
Illinois	Earnings threshold	Void for workers earning $75,000 or less; non-solicits void at $45,000 or less
Tennessee	New threshold from July 1, 2026	Void for employees earning under $70,000 in annualized compensation
Virginia	Low-wage ban plus 2026 changes	Banned for low-wage and overtime-eligible employees; from July 1, 2026, unenforceable after discharge without cause unless severance is provided
Florida	Pro-enforcement CHOICE Act	Since July 1, 2025, compliant agreements for high earners can last up to four years and are presumed enforceable

Threshold figures for Washington, Oregon and Illinois are from this Epstein Becker Green summary of 2026 thresholds. Several states adjust them every year, and many others restrict non-competes for specific professions, especially physicians and other healthcare workers, so always check the current statute before relying on an agreement.

What makes a non-compete enforceable where allowed

In states without a ban, courts usually apply a reasonableness test:

• Legitimate business interest. Protecting trade secrets, confidential information or customer goodwill, not simply avoiding competition.
• Reasonable duration. Six to 12 months is easier to defend than several years for an ordinary employee.
• Reasonable geography. The area where the employee actually worked or served customers.
• Narrow scope. Limited to the type of work the employee did, not the whole industry.
• Consideration. Something of value in exchange. Some states say continued employment is not enough for existing employees.
• Procedural rules. Advance notice, the right to consult a lawyer, or separate signed documents, depending on the state.

Some courts will narrow an overbroad agreement; others throw out the whole clause. Drafting it narrowly from the start is safer.

Worked examples: is this non-compete enforceable?

• Tennessee, office manager earning $64,000, agreement signed August 2026. Below the $70,000 floor for agreements made after July 1, 2026, so the non-compete is void. A confidentiality agreement would still protect client lists.
• Oregon, sales lead earning $110,000. Below the 2026 threshold of $119,541, so the non-compete is void unless the employer uses a statutory exception; a non-solicitation clause is still available.
• Illinois, senior engineer earning $140,000, one-year restriction limited to direct competitors. Above the $75,000 threshold; likely enforceable if the business interest, scope and procedural requirements are met.
• Virginia, technician fired without cause in September 2026 under an agreement signed that month. Unenforceable unless the employer provides the severance or payment disclosed at signing.
• California, any employee. Void, and asking an employee to sign one can itself create liability.

These are simplified illustrations; real outcomes depend on the full statute, the agreement and the facts.

Better alternatives for small businesses

Agreement	What it does	Enforceability
Confidentiality (NDA)	Protects trade secrets and confidential information	Enforceable in nearly every state if reasonable
Client non-solicitation	Stops active pursuit of your clients for a period	Widely enforceable, with limits in some states
Employee non-solicitation	Stops recruiting your staff	Widely enforceable, with limits
Intellectual property assignment	Confirms the business owns work created for it	Generally enforceable
Garden leave	Employee stays on paid leave during notice	Often enforceable because the employee is paid

Many small businesses get the protection they need from a confidentiality agreement plus a 12-month client non-solicitation clause, at much lower legal risk.

Non-competes in contractor and client agreements

Freelancers and agencies see restrictive clauses in client contracts too. A client might try to stop you from working with its competitors, or an agency might bar you from working directly with its end client. When reviewing a freelance contract or service agreement:

• Push for a narrow non-solicitation clause instead of a broad non-compete.
• Limit the period, for example 6 to 12 months after the project ends.
• Name specific competitors rather than a whole industry.
• Ask for higher rates if a client wants exclusivity.

Broad control over who a contractor may work for is also a sign of employment, which can create misclassification risk for the client; see W-2 vs 1099. Keep scope, deliverables and restrictions in the statement of work, and bill against it with a clear independent contractor invoice.

If you have already signed a non-compete

Employees and contractors often discover an old non-compete when they want to change jobs or go freelance. Before you assume it binds you:

1. Find the signed copy and check the date, the state law it chooses and any restricted period, area and activities.
2. Check the law where you live and work. Many states protect their residents even if the agreement chooses another state's law.
3. Compare your earnings with any salary threshold for the year you signed and the current year, depending on how the statute applies.
4. Look at what was exchanged. Some states require more than continued employment for an existing employee.
5. Separate the clauses. Even if the non-compete fails, confidentiality and non-solicitation clauses may still apply.
6. Get advice before acting if the restriction looks enforceable. A short consultation is far cheaper than defending an injunction.

If you start freelancing for clients your former employer never served, in a different line of work, the practical risk is usually low even where a clause exists. Keep records of how you found each client.

What enforcing a non-compete costs an employer

Small businesses sometimes overestimate how useful a non-compete is in practice. Enforcing one usually means hiring a lawyer, sending a demand letter and possibly asking a court for an injunction, which can cost thousands of dollars before any hearing. Several states now let workers recover damages, penalties and attorney fees from employers that use void agreements; Washington's new law, for example, provides at least $5,000 per violation plus fees. Weigh that cost against the harm you are trying to prevent, and against the protection a well-drafted confidentiality and non-solicitation agreement already gives you.

Sale-of-business non-competes

When you sell a business, the buyer usually requires you not to compete for several years. These covenants are treated differently and are allowed even in most ban states, because the buyer is paying for goodwill. Washington's new law applies this exception only to owners of at least 1% of the business. If you are planning an exit, see how to sell a small business.

Step by step: using restrictive covenants safely

1. Identify what you actually need to protect: client relationships, pricing, trade secrets or staff.
2. Check each state where your employees live and work, including remote staff.
3. Choose the narrowest tool that protects that interest, often an NDA and non-solicit.
4. If you still need a non-compete, confirm salary thresholds, notice periods and consideration rules.
5. Give the agreement with the offer letter, not after the employee starts, and allow time for review.
6. Review every agreement annually as thresholds and laws change.

This is general information, not legal advice. Non-compete law changes frequently, so have an employment lawyer in your state review any agreement before you use it. For hiring basics, see hiring your first employee.

Whether you are hiring staff or working as a contractor, clear documents prevent disputes. For the billing side, create professional invoices with our free invoice generator, with no sign-up required, and download them as PDFs.