How to review a non-compete agreement

Whether a non-compete is enforceable depends almost entirely on state law, and state law has changed fast. This guide covers where federal law stands, the state rules to check first, the clause-by-clause review, and how to run it in Word with LexDraft.

Last checked: 17 October 2026. The law changes; check the current position before relying on this page.

Is there a federal non-compete ban?

No. The FTC issued a rule in 2024 that would have banned most non-competes, but a federal court in Texas set it aside in August 2024 in Ryan, LLC v. FTC. In September 2025 the FTC voted to dismiss its appeals and accept the vacatur, so the rule never took effect. The FTC has said it will pursue non-competes case by case under its existing powers instead. State law governs enforceability, and federal antitrust law still applies to agreements between competitors.

State rules to check first

• Bans. California (Business and Professions Code section 16600 and related sections), North Dakota, Oklahoma and Minnesota (for agreements from 1 July 2023) prohibit most employee non-competes, subject to exceptions such as the sale of a business. California also restricts attempts to enforce them against California employees regardless of where they were signed. Wyoming adopted a broad ban for agreements entered on or after 1 July 2025, with exceptions.
• Salary thresholds. Several states, including Colorado, Illinois, Washington, Oregon, Maine, Maryland, Virginia, Rhode Island, New Hampshire and the District of Columbia, bar non-competes for workers below an earnings threshold. Thresholds are often adjusted every year.
• Notice and timing. Some states require advance notice, a separate signed document, or advice to consult a lawyer. Massachusetts, for example, also requires garden leave pay or other agreed consideration and limits most non-competes to 12 months.
• Industry rules. Many states restrict non-competes for physicians and other healthcare workers, and some for broadcasters or low-wage workers.
• Enforcement-friendly regimes. Florida enforces reasonable non-competes by statute, and its 2025 CHOICE Act added a framework for covered agreements with higher earners. Check whether it applies.

The list changes often. Treat it as a starting point and check the current statute in each relevant state.

Clause checklist

• Legitimate interest. Trade secrets, confidential information, customer goodwill or specialised training. A restriction that only prevents ordinary competition is vulnerable.
• Duration. Six to 12 months is easier to defend than two years in most states.
• Geography and scope. Tie the restricted territory and activities to what the employee actually did.
• Consideration. Some states require more than continued employment for a non-compete signed mid-employment.
• Blue pencil or reformation. States differ on whether a court may narrow an overbroad clause, strike it, or must void it entirely.
• Choice of law and forum. Several states limit the use of out-of-state law or forum against local employees.
• Tolling, notice and remedies. Check tolling during breach, obligations to tell new employers, fee shifting and liquidated damages.
• Alternatives. Non-solicitation, confidentiality and garden leave clauses may protect the same interest with less risk.

Sale-of-business non-competes

Non-competes given by a seller in the sale of a business are treated more favourably in most states, including several ban states. Check that the seller actually received sale proceeds and that scope matches the business sold.

A non-compete review workflow in Word

LexDraft is a Word add-in from Microsoft AppSource. It opens as a side panel in Word 365 (Windows and Mac), Word 2021 and Word on the web, so the agreement never leaves the tool you already draft in.

1. Open the agreement in Word and open LexDraft in the side panel.
2. Pick the governing law. Select the state named in the governing law clause so LexDraft looks for state-specific red flags.
3. Run the review. LexDraft has four built-in playbooks (NDA, SaaS MSA, DPA and services agreement) and no dedicated non-compete playbook, so this runs as a general review against the governing law you chose. Use the checklist on this page to direct your own read.
4. Triage by severity. Findings are graded Critical, High, Medium or Low, and LexDraft flags standard terms that are missing.
5. Run the quick checks. The defined-term and cross-reference checks are rule-based and run without AI.
6. Accept or reject each redline. Accepted changes land as native Word tracked changes.
7. Verify and sign off. You check every output before it goes to the client or the other side.

What LexDraft does not do

LexDraft does not track state non-compete legislation or predict enforceability. It flags points to check under the state you select; you check the current law and every output.

This guide is general information, not legal advice. LexDraft does not give legal advice; qualified counsel must review every draft. Spotted something out of date? Email support@lexdraft.ai and we will fix it.