Non-Compete Agreements in 2025: A State-by-State Reality Check

The Federal Trade Commission's 2024 rule banning most non-compete agreements was vacated by federal courts before it took effect. But employers who drew comfort from that outcome misread the landscape. The more significant trend is the continuing state-by-state erosion of non-compete enforceability — a trend that has accelerated even as the FTC rule was being litigated.

California has always stood apart: non-compete agreements for employees are void as a matter of statute, with limited exceptions. Minnesota joined California in 2023. Oklahoma and North Dakota have long had similar regimes. More notably, states that have historically enforced non-competes — including Illinois, Colorado and Washington — have enacted significant restrictions in the past two years.

The pattern is consistent: states are moving toward limiting non-competes to higher-compensated employees, shortening the permissible duration, tightening the geographic scope, and in some cases requiring notice periods and consideration beyond continued employment.

For employers with multi-state workforces, this means that a uniform restrictive covenant agreement is increasingly difficult to defend and may be entirely unenforceable in several key states. The practical response has multiple layers.

First, choice-of-law provisions in non-compete agreements are being scrutinized more aggressively. Courts in restrictive states are more willing to disregard employer-favorable choice-of-law clauses where the employee works in, or is a resident of, a state with protective non-compete law.

Second, employers should evaluate whether non-compete agreements are actually necessary for their workforce strategy — or whether other mechanisms, such as robust trade secret protection, carefully drafted non-solicitation agreements, and strong information security practices, can provide meaningful protection with less legal risk.

Third, for roles and states where non-competes remain viable, the agreement must be carefully tailored. Courts have become less willing to blue-pencil overbroad agreements down to an enforceable scope — in many jurisdictions, overbreadth now renders the agreement void rather than merely reduced.