Can I Require a Non-Compete Agreement?

If you have poured years into building your client list, your methods, and your reputation, the fear underneath this question is completely legitimate. Nobody wants to train someone for three years and then watch them walk across the street with your playbook and half your accounts. So founders reach for a non-compete because it feels like the obvious lock on that door. The honest answer is that yes, in most states you can require one, but whether it will actually protect you is a different question, and the answer has changed a lot in the last two years. 

Let's sort out where things stand and whether a non-compete is even the right tool for what you are trying to protect.

One note before we start: this is education, not legal advice. Non-compete law is genuinely state-specific and moving fast, so treat this as the map, and have an employment attorney check your actual route.

The state patchwork, and why it is the whole game

There is no single American answer to this question. A few states, most famously California, along with Minnesota, North Dakota, and Oklahoma, ban non-competes for employees almost entirely. In those states, the agreement you ask a worker to sign is generally void from the start, and in California, merely requiring one can itself create legal exposure.

Most other states allow non-competes but police them, and the policing is getting stricter every legislative session. Several states now impose income thresholds, so non-competes are only enforceable against higher earners. 

Others have carved out specific industries, with healthcare workers the most common. And the newest wave goes further: some states have passed outright bans that take effect over the next year or two, and others now block enforcement against employees who were let go without cause. The direction of travel is unmistakable, and it is away from non-competes.

One more wrinkle that catches founders with remote teams: what generally matters is where the employee works, not where your company sits. A non-compete that is solid in your home state can be worthless for your developer in California.

What happened with the FTC rule

You may remember headlines in 2024 announcing that the federal government had banned non-competes nationwide. Here is the short version of what actually happened. The FTC did issue a sweeping rule, but a federal court blocked it before it ever took effect, and after the change in administration, the agency dropped its appeals and formally took the rule off the books in early 2026. There is no federal ban.

But the story did not end there, and this is the part founders should not skip. The FTC has shifted to going after non-competes one company at a time, and its recent enforcement actions share a pattern: employers who made everyone sign, from executives down to hourly technicians and customer service reps, regardless of whether the role justified it. 

Those companies have been ordered to stop enforcing their agreements entirely, and warning letters have gone out across whole industries, with healthcare drawing particular attention. The lesson for a small business is simple. A blanket non-compete stapled into every offer letter is now the exact profile regulators are hunting, while narrow agreements tied to genuine competitive risk are largely left alone.

HR Tip: Timing matters as much as wording. In a number of states, simply keeping someone employed is not enough legal consideration to support a non-compete signed after their first day. Present the agreement with the offer, before work begins, or attach it to something new and real, like a promotion, a raise, or a bonus. A non-compete slid across the desk in year three, signed for nothing, is often signed for nothing in both senses.

What makes one enforceable

In the states that allow them, courts weigh a non-compete against a consistent test. You need a legitimate business interest, meaning trade secrets, confidential information, or client relationships, not just a dislike of competition. 

The restriction has to be reasonable in scope, covering the work the person actually did rather than an entire industry. It has to be reasonable in geography, tied to where you genuinely compete. And it has to be reasonable in duration, where six months to a year is generally defensible and multi-year restrictions draw skepticism.

Overreach is not free, either. Some courts will trim an overbroad agreement down to something reasonable, but others will toss the whole thing, which means the aggressive version your cousin's lawyer drafted may protect you less than a modest one would have.

The tools that usually fit better

Here is the insider truth: much of what founders want from a non-compete is better delivered by two narrower agreements that courts and regulators treat far more kindly.

A non-solicitation agreement does not stop a former employee from working for a competitor. It stops them from taking your clients or recruiting your team on the way out. For most small businesses, that is the actual fear, and non-solicits are enforceable in many places where non-competes are shaky, including, in a limited form, some ban states.

A nondisclosure agreement protects the information itself, your pricing, processes, and customer data, no matter where the person goes. Combine an NDA with a targeted non-solicit and you have covered the realistic threats without telling anyone they cannot earn a living in their own field. Notably, even the recent federal enforcement orders that dismantled companies' non-competes explicitly left properly drawn NDAs and non-solicits standing.

HR Tip: If you use these agreements, keep an inventory. Know which employees signed what, in which version, under which state's law. When a key person resigns, the first question is always "what did they sign," and the founders who can answer it in five minutes are in a very different negotiating position than the ones digging through a decade of email.

The question nobody asks out loud

Finally, the small business reality check. Enforcing a non-compete means suing a former employee, which means legal fees that start in the tens of thousands, months of distraction, and your company's name on a lawsuit against someone your whole team knows. Are you actually going to do that over a departed account manager? 

If the honest answer is no, then the agreement's only power was deterrence, and employees increasingly know which agreements are paper tigers. A narrow, enforceable agreement you would genuinely stand behind protects you better than a broad one you would never take to court.

If your offer packet still includes a non-compete that predates all of this, it is worth a fresh look. Reviewing restrictive covenants, checking them against the states where your people actually work, and right-sizing them to what you truly need to protect is part of every Savvy HR audit. Bring us what your team has signed, and we will help you figure out what is protecting you, what is just paper, and what an attorney should update.