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From Ban to Balance: How Employers Can Responsibly Use Non-Competes

By Breni Malpass posted 24 days ago

  

In 2024, the Federal Trade Commission (FTC) proposed a sweeping ban on nearly all employee non-compete agreements—a move that could have affected approximately 30 million workers nationwide. However, after facing significant legal challenges and a change in leadership following the 2024 election, the FTC officially dropped its appeal in September 2025, ending the rule and leaving non-competes largely intact at the federal level. 

What Does This Mean for Employers? 

Federal Level: 

Non-compete agreements remain permissible. The FTC will not enforce a blanket ban, but employers should note that the agency may still challenge agreements that are anticompetitive, abusive, or violate antitrust laws. Agreements that restrict worker mobility or are overly broad could attract regulatory scrutiny. 

State Level:

State laws vary widely, and many are trending toward tighter restrictions: 

  • Banned States: California, Oklahoma, and Minnesota have broadly prohibited most non-compete agreements. 

  • Restricted States: North Carolina, Florida, and Texas still allow non-competes, but impose limits on duration, geographic scope, and the types of roles covered. 

If your organization operates in multiple states, it’s essential to tailor non-compete agreements to comply with each state’s specific requirements. 

What’s Generally Legal 

1. Reasonable Scope and Duration 

  • Example: A software company in North Carolina hires a senior developer and includes a non-compete that restricts the employee from working for direct competitors within a 25-mile radius for 12 months after leaving. The agreement is limited to roles similar to the one held and is supported by legitimate business interests (e.g., protecting proprietary code). Courts in NC often uphold such agreements if the geographic area and time frame are reasonable and the restriction is narrowly tailored.  

2. Protecting Trade Secrets or Confidential Information 

  • Example: An engineering intern is asked to sign a confidentiality and non-compete agreement that prevents them from joining a competitor for six months, but only if they had access to sensitive design criteria or proprietary processes. This is more likely to be enforceable, especially if the company can show the intern had access to valuable information.  

3. State-Specific Compliance 

  • Example: In Texas, a non-compete agreement for a sales manager restricts them from soliciting former clients for one year after leaving. Texas law allows non-competes if they are reasonable in scope and duration and protect legitimate business interests.  

What’s Likely Not Legal 

1. Overly Broad Restrictions 

  • Example: A retail chain requires all employees—including cashiers and stock clerks—to sign a non-compete that bars them from working for any other retailer nationwide for two years. Courts routinely strike down such agreements as overly broad and not tied to legitimate business interests.  

2. Blanket Industry Bans 

  • Example: A non-compete prohibits a former employee from working in any capacity in the industry, regardless of the position or location. For instance, a clause that prevents a marketing manager from working for any company in the marketing field anywhere in the U.S. for three years is almost certainly unenforceable.  

3. States with Full Bans 

  • Example: In California, Oklahoma, and Minnesota, most non-compete agreements are banned outright. Even if an employer tries to enforce a non-compete, courts in these states will not uphold it except in rare cases (such as the sale of a business).  

4. Low-Wage Worker Restrictions 

  • Example: A fast-food restaurant requires sandwich makers to sign non-competes. These have been widely publicized as unenforceable and have led to regulatory action and negative press. 

Best Practices for Employers 

To navigate this evolving landscape, employers should: 

1. Review and Update Agreements 

  • Ensure current non-competes are enforceable, reasonable, and not overly restrictive. 

  • Regularly audit agreements to reflect changes in federal and state law. 

2. Customize by State 

  • Avoid a “one size fits all” approach. Adapt agreements to meet the legal standards of each state where you operate. 

  • Consider creating a quick-reference table or checklist for state-specific requirements. 

3. Consider Alternatives 

  • Use non-solicitation or confidentiality agreements, especially in states where non-competes are banned or heavily restricted. 

  • Define these alternatives clearly for employees and managers. 

4. Stay Informed 

  • Monitor FTC enforcement trends and new state legislation. 

  • Subscribe to legal updates or consult with employment law experts regularly. 

5. Train HR and Legal Teams 

  • Provide ongoing training to ensure teams understand the latest requirements and can draft compliant contracts. 

  • Encourage proactive communication with employees about their rights and obligations. 

While the FTC’s proposed non-compete ban is no longer moving forward, employers must remain vigilant. Federal regulators may still challenge overly broad agreements, and state laws continue to evolve—often toward greater employee protection. To stay compliant and avoid legal headaches: 

  • Review your agreements now. 

  • Tailor contracts by state. 

  • Consider alternative protections. 

  • Keep up with enforcement developments. 

Being proactive today will help your organization maintain compliance and protect both your business interests and your workforce. If you have any questions or want to discuss a situation with an expert, connect with the HR advice team!

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