Free Non-Compete Agreement Template – State Enforceability Guide
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The short version (2026):
- The federal non-compete ban is officially dead: after courts set it aside, the FTC dropped its appeals in September 2025 and formally removed the rule from the books effective February 12, 2026. State law governs.
- Know your state first: California, Minnesota, North Dakota, and Oklahoma ban non-competes for workers outright; many other states enforce them only above pay thresholds or when narrowly drawn.
- Where enforceable, narrow wins: a protectable interest, a short duration, and a tight scope beat broad language that a court trims or tosses.
- Often an NDA plus a non-solicit does the real job with none of the enforceability drama.
The Clause the Whole Country Argued About
Few contract clauses spent the last two years in more headlines than the non-compete. A federal ban was announced, challenged, blocked, abandoned, and finally erased from the books, and both employers and workers came out the other side confused about what’s actually enforceable in 2026. Here’s the current, verified state of play, a template for the states where these clauses still work, and the honest advice about when a lighter tool does the job better.
Definitions first: a non-compete restricts a worker from joining competitors or starting a competing business for a period after leaving. It’s the most aggressive of the restrictive covenants, which is exactly why courts scrutinize it hardest.
What Happened to the Federal Ban (Verified Timeline)
The short history, so you can ignore outdated articles confidently: the FTC adopted a near-total ban on worker non-competes in 2024. Before it took effect, a federal court in Ryan, LLC v. FTC set the rule aside nationwide as exceeding the agency’s authority. In September 2025 the FTC voted to drop its appeals and accept the vacatur (FTC press release), and effective February 12, 2026 the rule was formally removed from the Code of Federal Regulations (Federal Register).
Two practical consequences. First, state law governs non-competes again, so the map below is the law that matters. Second, the FTC didn’t leave the field: it has signaled continued case-by-case enforcement against non-competes it views as unfair methods of competition, so sweeping covenants over large low-wage workforces remain a federal risk even without the rule.
The State Map in 2026
| Approach | States | What It Means |
|---|---|---|
| Ban states | California (B&P Code §16600), Minnesota, North Dakota, Oklahoma | Worker non-competes are void regardless of how reasonable; California even penalizes attempting them |
| Threshold states | Several, including Colorado, Illinois, Washington, Oregon, and Virginia | Enforceable only for workers above income floors that adjust over time; below the line, void. Verify your state’s current number before drafting |
| Reasonableness states | Most others | Enforced if narrowly tailored: legitimate business interest, reasonable time and territory |
| Carve-out trend | Growing list | Healthcare-worker restrictions and notice/consideration requirements keep expanding state by state; 2026 alone added new limits in several states |
The drafting consequence: a non-compete is a state-specific document. The same paragraph that’s enforceable in Texas is void in Minneapolis and sanctionable in San Francisco, and choice-of-law clauses rarely rescue it, because protective states apply their own rules to their own residents.
Free Non-Compete Template (Copy and Paste)
For use where enforceable, and drafted narrow on purpose; the broad version fails more often. Replace brackets, and check your state’s threshold and consideration rules first.
NON-COMPETE AGREEMENT
This Agreement is made on [DATE] between [COMPANY NAME] (“Company”) and [WORKER NAME] (“Employee”), in consideration of [Employee’s initial employment / a payment of $___ / a promotion and salary increase, described below], the sufficiency of which both parties acknowledge.
1. LEGITIMATE INTEREST. Employee will receive access to the Company’s trade secrets, confidential business information, and customer relationships, which this Agreement protects.
2. RESTRICTED ACTIVITY. During employment and for [6 / 12] months after it ends, Employee will not perform [DESCRIBE THE SPECIFIC ROLE/FUNCTION, e.g., “outside sales of commercial HVAC services”] for a Competing Business. “Competing Business” means an entity that [DEFINE NARROWLY, e.g., “sells commercial HVAC services to customers in the Restricted Area”].
3. RESTRICTED AREA. [Choose one:] (a) within [COUNTY/RADIUS] of the Company’s [LOCATION]; or (b) with respect to customers Employee serviced or solicited during the final [12] months of employment (a customer-based restriction, often more defensible than geography).
4. CARVE-OUTS. Nothing prevents Employee from (a) owning less than [2]% of a public company, (b) working for a Competing Business in a role unrelated to the Restricted Activity, or (c) any activity protected by law.
5. NON-SOLICITATION. For [12] months after employment ends, Employee will not solicit the Company’s customers with whom Employee had material contact, or its employees, for a Competing Business.
6. REMEDIES. Breach causes irreparable harm; the Company may seek injunctive relief in addition to damages.
7. SEVERABILITY / REFORMATION. If any restriction is found overbroad, the parties intend the court to enforce it to the maximum lawful extent [where state law permits reformation].
8. GENERAL. Governed by the laws of [STATE WHERE EMPLOYEE WORKS]; entire agreement; amendments in signed writing.
Company: __________________ Date: ________ Employee: __________________ Date: ________
Making It Enforceable (Where It Can Be)
Courts in reasonableness states weigh three things, and drafting to them is the whole game. A protectable interest: trade secrets and customer relationships qualify; “we trained them” and generic skills don’t. Reasonable scope: 6–12 months survives far more often than 24; a customer-based restriction beats a 100-mile circle; role-specific language beats “any capacity.” Real consideration: a new job counts everywhere; for existing employees, several states require something more than continued employment (a raise, bonus, or promotion), so paper the exchange. Timing echoes the offer-letter rule: present the covenant with the offer, never on day one after the candidate has resigned elsewhere. And expect the blue-pencil lottery: some states trim overbroad covenants, others void them entirely, which is why drafting narrow beats drafting brave.
Need it matched to your state’s current rules? LawDepot’s builder generates a state-aware non-compete step by step.
Non-Compete vs. NDA vs. Non-Solicit
| Tool | What It Restricts | Enforceability |
|---|---|---|
| Non-compete | Working for competitors at all | Hardest: banned in four states, capped in many |
| NDA | Using or disclosing confidential information | Enforceable everywhere when reasonably drawn |
| Non-solicit | Poaching customers or employees | Widely enforceable, even in some ban states within limits |
The honest sequencing for most employers: protect information with the NDA, protect relationships with the non-solicit, and reserve the non-compete for the handful of roles where those two genuinely can’t do the job, senior people carrying strategy and trade secrets. That stack survives in every state; the non-compete alone survives in some.
Non-Competes for Independent Contractors: Mostly Don’t
Restricting a contractor from serving other clients pulls against the very independence that makes them a contractor: serving multiple clients is a core factor in every classification test, so a broad non-compete on a 1099 worker is both harder to enforce and live evidence for a misclassification claim. If a genuine trade-secret concern exists with a contractor, use the confidentiality clause in the contractor agreement plus a narrow non-solicit, and leave the non-compete for employees in the states that allow it. The same logic applies at the exit: covenants offered inside severance packages are governed by the separation agreement rules, where fresh consideration is the whole game.
Common Non-Compete Mistakes
- Using one in a ban state. Void in Minnesota, North Dakota, and Oklahoma, and California adds penalties for trying.
- One template for a multi-state workforce. The covenant must match each worker’s state, thresholds included.
- “Any role, anywhere, two years.” Breadth reads as punitive; courts toss or trim it, and some void the whole clause.
- No new consideration for existing employees. Several states require more than “keep your job”; paper a real exchange.
- Springing it on day one. After the candidate resigned their old job, courts notice the ambush; present it with the offer.
- Reaching for it first. The NDA + non-solicit stack protects most businesses with none of the litigation odds.
Frequently Asked Questions
Are non-competes banned in the U.S. in 2026?
Not federally. The FTC’s 2024 ban was set aside in court, the agency dropped its appeals in September 2025, and the rule was removed from the CFR effective February 12, 2026. State law governs, and four states ban worker non-competes outright.
Which states ban non-competes?
California, Minnesota, North Dakota, and Oklahoma ban them for workers generally, and a growing list of states restricts them for healthcare workers or below income thresholds.
How long can a non-compete last?
Where enforceable, 6 to 12 months is the defensible norm; two years survives only with strong justification, and longer mostly in business-sale contexts, which courts treat far more leniently than employment covenants.
Is my old non-compete valid after the FTC rule died?
Its validity was never decided by the federal rule taking effect, so it rises or falls under your state’s law: void in ban states, threshold-tested where those apply, and reasonableness-tested elsewhere.
Does a non-compete need separate pay?
A new job offer is sufficient consideration everywhere. For existing employees, several states require fresh value, a raise, bonus, or promotion, so the safest drafting recites exactly what was exchanged.
Can my employer enforce a non-compete if I’m laid off?
State-dependent and increasingly restricted; some states void or limit covenants after terminations without cause. Where the law is silent, courts still weigh the equities. Check your state before assuming either way.
What should I use instead of a non-compete?
An NDA for information and a non-solicit for relationships. The pair is enforceable nearly everywhere and covers what most businesses actually need to protect.
Protect the Interest, Not the Ego
The two-year national argument settled one thing: restraints on workers earn enforcement only when they protect something real. Check your state, draft narrow, paper the consideration, and reach for the NDA and non-solicit first. The covenant that survives court is the one that never tried to do too much.
Building the full restrictive-covenant stack? LawDepot generates NDAs, non-solicits, and state-aware non-competes step by step.
Sources & References
This guide is fact-checked against the following official and authoritative sources:
- FTC — Accession to Vacatur of the Non-Compete Rule (2025)
- Federal Register — Removal of the Non-Compete Rule (2026)
- California B&P Code §16600
- Cornell LII — Contract
Fact-checked: July 2026 · ClearLegalTips editorial team. This is legal information, not legal advice.
Marcus Thorne writes about business law and contracts for ClearLegalTips. He focuses on making non-compete agreements, buy-sell terms, and everyday business paperwork understandable for owners handling them without a lawyer.
