What Is A Non-Compete Agreement? (2026)
Contributor
Reviewed By Adam Ramirez, J.D.
Editor
Summary
- Non-compete agreements restrict you from engaging in competitive work
- Many courts view non-competition agreements skeptically
- Some state legislatures have restricted or banned their use
Non-compete agreements, also called non-competition agreements, restrict a business or worker from competing against a current or former employer. Many states allowed these agreements in the past on the theory that people and businesses have the freedom to agree to anything they want.
However, the tide has turned against these agreements, with many jurisdictions banning or limiting their use. Here’s what you should know.
Understanding Non-Compete Agreements and How They Work
What is a non-compete agreement? This contract restricts the commercial activities of a person or business so they do not infringe on another’s line of commerce.
In some cases, these agreements address legitimate concerns, but they can also be misused to restrict workers’ mobility.
Key Components That Make a Non-Compete Enforceable
What is a non-compete agreement drafting process that increases the likelihood of enforceability? If you need to negotiate or draft a non-compete agreement, consider using templates customized for your state. Each state has unique rules for enforcing these agreements, and many states restrict or ban them.
Non-compete agreements incorporate different terms depending on their use. Some examples of non-compete templates include the following:
- For employees, create an employee non-compete agreement.
- For independent contractors, create a contractor non-compete agreement.
- For business sales, create a sale of business non-compete agreement.
Some common components shared by all of these agreements include the names and signatures of all the parties, the limitations imposed and the duration of those limitations.
States That Ban or Restrict Non-Compete Clauses
Several states restrict when and how courts will enforce non-compete agreements. Most states require these agreements to have reasonable limits in scope.
However, some states go even further. For example, Oklahoma bans all non-compete agreements, except those that block former employees from soliciting sales from a prior employer’s established customers. California, North Dakota and Minnesota have also banned them.
Non-Compete vs. Non-Solicitation vs. NDA
Non-compete agreements often overlap with non-solicitation agreements and non-disclosure agreements (NDAs). What is a non-compete agreement’s key difference compared to these agreements?
A non-compete agreement focuses on the work you perform. You are usually limited in the roles and industries in which you can work or run a business.
On the other hand, a non-solicitation agreement focuses on the people or businesses you can contact. You might be restricted from contacting customers, vendors or sales prospects of a former employer.
An NDA focuses on the information you can disclose. An NDA might restrict you from telling your new employer about your former employer’s product launch plans.
How to Get Out of a Non-Compete Agreement
If you need to get out of a non-compete agreement, consider contacting a lawyer in your state to file a lawsuit blocking its enforcement. Judges in many states can invalidate a non-compete agreement if it is unreasonable in duration, geography or industry.
If the agreement’s restrictions are too long, cover too much area or overly restrict which industries you can seek work in, you may be able to get out of it.
Using the Right Form Is Essential
Courts view these agreements skeptically because of the high burdens imposed. Using the right form, customized for your state, can increase your likelihood of creating a valid and enforceable agreement.
