Non-Compete Agreement

A non-compete agreement is a contract, or a clause within one, under which a worker agrees not to engage in competitive activity after the employment relationship ends. Massachusetts defines it in statute as an agreement "under which the employee or expected employee agrees that he or she will not engage in certain specified activities competitive with his or her employer after the employment relationship has ended", which is as good a general description as exists.

Three related clauses are routinely confused with it and are different things. A non-solicitation clause bars approaching the employer's customers or employees but not working for a competitor. A confidentiality or non-disclosure clause protects information rather than restricting where you work. An invention assignment clause allocates ownership of what you create. Massachusetts' statute lists all three as things that are not noncompetition agreements, along with agreements made in connection with the sale of a business, forfeiture agreements, and — where an employee is given seven business days to rescind — agreements made at separation. The distinctions matter because a state that voids non-competes may still enforce the other three.

The federal position, dated, because it has moved four times in three years. On 7 May 2024 the Federal Trade Commission published the Non-Compete Clause Rule, which would have made it an unfair method of competition to enter into a non-compete with a worker on or after 4 September 2024, with existing agreements unenforceable against everyone except senior executives. Three federal district courts ruled on challenges to it. In Ryan, LLC v. FTC, the court held the rule unlawful and set it aside, having "concluded that (i) the FTC promulgated the Non-Compete Rule in excess of its statutory authority, and (ii) the Rule is arbitrary and capricious." On 5 September 2025 the Commission voted 3 to 1 to dismiss its own appeals and accede to vacatur. On 12 February 2026, effective the same day, it published a final rule removing the regulation: "PART 910 [Removed and Reserved]."

So as of September 2026 there is no federal rule prohibiting non-competes, nothing awaiting a court, and no agency appeal outstanding. Descriptions that say the rule is "on appeal", "paused" or "expected to take effect" are describing 2024.

What the Commission did not give up is case-by-case enforcement, and this is the part most summaries drop. Section 5 of the FTC Act prohibits unfair methods of competition, and the Commission's own analysis states that this prohibition "includes agreements in restraint of trade proscribed by section 1 of the Sherman Act as well as agreements or other practices that conflict with the basic policies of the Sherman and Clayton Acts even if they may not actually violate these laws", adding that courts "have long found agreements not to compete between workers and their current or former employers to be proper subjects for scrutiny under Federal antitrust law." It has continued to act on that basis: in April 2026 the Commission published a proposed consent order settling charges that an employer "engaged in unfair methods of competition in violation of section 5 of the FTC Act ... by entering into Non-Compete Agreements with its employees and enforcing them against its former employees." A rule that reaches every employer and an enforcement action that reaches one are different instruments, and only the first was withdrawn.

State law is the operative law, and the two poles are worth naming precisely.

California voids them. Business and Professions Code section 16600(a): "Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void." Subsection (b)(1), added in 2023, instructs that the section "shall be read broadly ... to void the application of any noncompete agreement in an employment context, or any noncompete clause in an employment contract, no matter how narrowly tailored, that does not satisfy an exception in this chapter", and declares that this is not a change in the law but a statement of it. Subsection (c) extends the section beyond parties to the contract.

Massachusetts enforces them, on conditions. General Laws chapter 149, section 24L sets eight minimum requirements for validity. The agreement must be in writing, signed by both parties, and expressly state the employee's right to consult counsel. If entered into at hiring it must be provided by the earlier of a formal offer or ten business days before employment starts; if entered into later, it needs fair and reasonable consideration independent of continued employment, plus ten business days' notice. It must be no broader than necessary to protect trade secrets, other confidential information, or goodwill, and may be presumed necessary only where a non-solicitation or confidentiality agreement could not adequately protect the interest. The restricted period may not exceed twelve months, extended to two years only where the employee breached a fiduciary duty or unlawfully took the employer's property. Geographic reach limited to areas where the employee worked or had material influence in the last two years is presumptively reasonable, as is a scope limited to the services the employee actually performed. And it must be supported by a garden leave clause or other agreed consideration specified in the agreement.

Section 24L(c) then makes the agreement unenforceable against four groups outright: employees classified as nonexempt under the Fair Labor Standards Act; students in an internship or short-term employment while enrolled; employees terminated without cause or laid off; and employees aged eighteen or younger. Subsection (e) blocks a choice-of-law clause used to escape the section where the employee has been a Massachusetts resident or worked in Massachusetts for at least thirty days before leaving.

Between those two poles sits a large and changing group of states, some imposing earnings thresholds below which a non-compete is unenforceable, some carving out particular occupations, some requiring advance notice or consideration, and some leaving the question to judge-made reasonableness tests. Several of the earnings thresholds are indexed and move every year. This page does not count them or list them, because any such list is stale within a year and because the answer for an individual reader is in one jurisdiction's law rather than in a national tally: the state whose law governs your agreement, which is usually where you live and work rather than wherever the employer is headquartered.

A term nobody reads until it matters: reformation. Massachusetts section 24L(d) allows a court, in its discretion, to "reform or otherwise revise a noncompetition agreement so as to render it valid and enforceable to the extent necessary to protect the applicable legitimate business interests." Where a state permits reformation, an over-broad agreement is not simply void; a court may cut it down and enforce what remains. Where a state does not, an over-broad agreement can fail entirely. Which approach applies is one of the more consequential differences between jurisdictions and it is rarely visible in the document itself.

1. Establish which state's law governs, and whether that state will honor the choice-of-law clause in the document. Massachusetts, for one, will not where it is being used to escape its own statute.

2. Read the four operative terms, not the recitals: what activity is restricted, for how long, in what territory, and against which employers.

3. Read the definitions those terms depend on. "Competitor" and "competitive activity" are drafted terms, and a broad definition can turn a narrow-looking restriction into a wide one.

4. Separate the neighboring clauses. A non-solicitation or confidentiality clause may survive in a state where the non-compete does not.

5. Find the consideration. Some states require something given in exchange beyond continued employment, and require it to be specified in the agreement.

6. Ask what happens if a court disagrees with the employer. Whether your state reforms an over-broad agreement or voids it changes the negotiating position substantially.

Working through a hypothetical clause. An agreement says the employee may not "work for any competitor anywhere in the United States for three years after termination for any reason."

Under California law, section 16600(b)(1) directs that the provision be read broadly to void any noncompete in an employment context "no matter how narrowly tailored" absent a statutory exception, so the narrowness of the drafting does not save it and the length is beside the point.

Under Massachusetts law the same clause fails several requirements at once: the three-year period exceeds the twelve-month maximum in section 24L(b)(iv); a nationwide reach is well outside the presumptively reasonable area where the employee worked or had material influence; "any competitor" is broader than the specific services the employee performed; and "for any reason" would purport to reach an employee laid off or terminated without cause, against whom section 24L(c)(iii) makes the agreement unenforceable outright. Whether a Massachusetts court would strike it or reform it down to something valid is a question section 24L(d) leaves to the court's discretion.

In a third state the same words might be enforced, cut down, or ignored, depending on that state's own rules. Which is the point: the clause has no meaning until you know whose law reads it.

Pros

• Where enforceable, it can be the consideration for something an employee wants, such as access to a client book, senior training, or a payment during the restricted period.
• A narrowly drawn agreement can be less restrictive in practice than a broad non-solicitation clause, because it may bar only a named list of employers.
• Massachusetts-style statutes require advance notice and an express right to consult counsel, which converts a signature at the desk into a decision with time attached.
• Because the terms are contractual, the length, territory and definitions are all negotiable before signing, and are frequently more negotiable than pay.

Cons

• It restricts moving to a competitor, which for many workers is where the largest pay increases come from.
• Enforceability turns on state law that varies widely and changes, so the same document can be void in one state and enforceable in the next.
• The cost of finding out is a lawsuit, and the threat of one can deter a move the employer would never actually have sued over.
• Where a state permits reformation, an over-broad agreement is not simply unenforceable; a court may narrow it and enforce the remainder.
• Most agreements are presented at hiring, when the employee has the least information and the most reason not to object.