Non-Compete Agreement Template
Non-competes have become the most heavily regulated restrictive covenant in U.S. employment law. California, Minnesota, North Dakota, and Oklahoma void them outright; Massachusetts requires garden leave and $75,000+ earnings; ten more states impose income-threshold restrictions. This template applies the operative state's regime — including the FTC Non-Compete Rule litigation status after Ryan LLC v. FTC (vacated July 2024) — and includes the Massachusetts §24L 10-business-day pre-hire notice.
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What a non-compete actually does (and where it doesn't work)
A non-compete is a post-employment restraint on trade — the strongest restrictive covenant in the employer's toolkit and the most disfavored by courts. It restricts a former employee from working for a competitor or starting a competing business for a defined period within a defined geography. In the operating context (not sale-of-business), the realistic enforcement framework in 2026 is: California, Minnesota, North Dakota, and Oklahoma void post-employment non-competes outright; ten more states (CO, IL, ME, MD, NH, OR, RI, VA, WA, with MA having its own framework) restrict them to high earners. In every other state, courts apply a reasonableness test that scrutinizes scope, duration, geography, and the legitimate business interest being protected. A "50-state non-compete" is the legal equivalent of a "FOR DECORATIVE USE ONLY" sticker — it makes the document look serious without doing anything.
Use the right tool
If the real concern is the former employee soliciting customers, use a customer non-solicit (more enforceable nearly everywhere). If the concern is the former employee using trade secrets, use a strong confidentiality clause plus an actual trade-secret identification program plus the DTSA whistleblower notice. If the concern is the former employee hiring away the team, use an employee non-solicit. The non-compete should be reserved for the narrow case where the legitimate interest cannot be protected any other way — typically a senior executive with customer relationships and trade-secret access, or a sale-of-business seller.
Specific scenarios this template covers
- Executive non-compete (CEO, key division head): 12-24 months, narrow industry definition, geography matching the employer's actual market, with garden leave or substantial severance as consideration. Often paired with a non-solicit and confidentiality.
- Sales-role non-compete: 6-12 months, geography matching the sales territory, narrow product/service definition. Massachusetts requires the §24L garden-leave structure even for sales roles.
- Technical / engineering non-compete: Generally a bad fit; use a confidentiality and trade-secret protection plus invention assignment. Non-compete is unenforceable in California (where most tech sits) regardless of contract language.
- Sale-of-business non-compete (asset or stock purchase): The strongest enforcement context — courts uphold non-competes ancillary to a sale because the seller received purchase consideration. California Bus. & Prof. Code §16601 permits these even though §16600 voids operating-context non-competes. Duration typically 3-5 years, geography matching the business sold.
- Partnership dissolution non-compete: California Bus. & Prof. Code §16602 permits non-competes ancillary to partnership dissolution. Similar reasonableness scrutiny applies.
- Healthcare-provider non-compete: State-specific physician non-compete bans (DC, NM, RI, Iowa, IN, TN, MN) override general state non-compete law. Some states impose buy-out provisions instead of bans.
Clauses that decide whether the non-compete survives a TRO motion
Restricted activities (narrowly tailored)
Defines the prohibited activities. Must be tied to the employer's actual business and the employee's actual role. "Any competitive activity" is unenforceable; "selling enterprise SaaS products in the customer success management category" is enforceable.
"During the Restricted Period, Employee shall not, directly or indirectly, anywhere in the Restricted Territory, engage in, be employed by, consult for, own (other than as a passive holder of less than 1% of a publicly traded company), or otherwise provide services to any Competing Business. 'Competing Business' means a business that sells or offers products or services that are the same as or substantially similar to the Company's products in the category of [specific category], and that compete directly with the products Employee was involved in selling or developing during the last 24 months of employment."
Pitfall: "Any business that competes with the Company in any line of business" is overbroad and unenforceable. Tie the definition to (i) specific products or service categories and (ii) the employee's actual involvement during a defined look-back period.
Geographic scope (employer's actual market)
Geography must match the employer's actual operating territory and the employee's actual role. Nationwide non-competes are generally rejected unless the employee actually worked nationally; "anywhere in the world" is rejected almost everywhere.
"'Restricted Territory' means the [counties / states / countries] in which the Company conducted business during the last twelve (12) months of Employee's employment AND in which Employee performed services or had customer-facing responsibility during the last twelve (12) months."
Pitfall: Defining geography by where the employer "could" do business or "plans to" do business is unenforceable. Tie to actual present operations and the employee's actual role.
Duration (matched to legitimate interest)
Duration must be no longer than necessary to neutralize the unfair competitive advantage the former employee obtained. Market: 6-12 months for sales and rank-and-file; 12-18 months for executives; 24+ months only for sale-of-business or sale-of-partnership-interest contexts.
"The 'Restricted Period' is twelve (12) months following the termination of Employee's employment for any reason. The Restricted Period shall be tolled (not run) during any period in which Employee is in breach of this Agreement, plus the duration of any legal proceedings to enforce the Agreement."
Pitfall: The tolling provision is enforceable in most states and converts a 12-month restriction into a real 12-month restriction (not 12 months less the inevitable enforcement delay). Without it, the former employee can run the clock during litigation.
Legitimate business interest recital
Identifies the specific protectable interest: trade secrets, customer relationships and goodwill, specialized training, or confidential information. Courts will not enforce a non-compete that does not protect a real interest beyond the employer's general aversion to competition.
"Employee acknowledges that during employment, Employee will receive (i) access to Company trade secrets including [specific categories]; (ii) specialized training of significant value; (iii) substantial customer-facing responsibility creating customer goodwill in favor of the Company; and (iv) confidential business information. The post-employment restrictions in this Agreement are necessary to protect these legitimate business interests and the unfair competitive advantage Employee would otherwise possess."
Pitfall: Boilerplate recitals about "trade secrets and goodwill" without specific identification are routinely discounted. Tie the recital to the specific information and customer relationships the employee will actually obtain.
Consideration (new, not continued employment in most states)
Non-competes require consideration beyond bare employment in most states. Acceptable: signing bonus, promotion, raise, equity grant, defined garden-leave payment. Massachusetts requires garden-leave equal to 50% of base salary OR mutually agreed-upon consideration.
"In consideration for Employee's covenants under this Agreement, the Company shall pay Employee a one-time signing bonus of $[●] within thirty (30) days of execution. [For MA: During the Restricted Period, the Company shall pay Employee garden-leave equal to fifty percent (50%) of Employee's highest annualized base salary during the last two years of employment, payable monthly, less standard withholdings.]"
Pitfall: In Illinois, "continued employment" is sufficient consideration only after at least two years of continued employment (Fifield v. Premier Dealer Services, 2013). In Massachusetts, garden-leave or mutually agreed-upon consideration is mandatory under §24L — no exceptions.
Massachusetts §24L compliance package
Massachusetts non-competes require five gating elements. Missing any one voids the entire non-compete.
"This Non-Compete is governed by Massachusetts G.L. c. 149 §24L. Employee acknowledges (i) receipt of this Agreement at least ten (10) business days before the commencement of employment or other date Employee was required to sign; (ii) Employee's right to consult counsel before signing; (iii) Employee's annualized earnings exceed $75,000 (or other applicable statutory threshold); (iv) the Restricted Period does not exceed twelve (12) months; and (v) the Company shall pay garden-leave equal to fifty percent (50%) of Employee's highest annualized base salary during the last two years, payable monthly during the Restricted Period."
Pitfall: The 10-business-day pre-hire notice and the right to consult counsel are not waivable. Sending the offer letter and the non-compete on the same day for execution at the start date is non-compliant — the non-compete is void.
Equitable relief and acknowledgment of irreparable harm
Acknowledges that breach causes irreparable harm and that the Company is entitled to injunctive relief. Converts a TRO motion from an evidentiary fight into a contractual admission.
"Employee acknowledges that any breach of this Agreement will cause irreparable harm to the Company for which monetary damages would be inadequate, and that the Company is entitled to seek a temporary restraining order, preliminary injunction, permanent injunction, and other equitable relief in addition to monetary damages and reasonable attorneys' fees. Employee waives any requirement to post bond as a condition to equitable relief, to the extent permitted by applicable law."
Pitfall: Some jurisdictions (notably California, where the entire clause is moot, and New York post-Reed Elsevier) refuse to enforce no-bond waivers — but the irreparable-harm admission still carries significant weight in a TRO hearing.
Blue pencil / severability / reformation
Authorizes the court to modify (rather than void) any provision found unreasonable. Critical because courts in different states apply blue-pencil (strike unenforceable words), reformation (rewrite the entire restriction), or red-pencil (void the entire restriction) approaches.
"If any provision of this Agreement is found by a court to be unreasonable in scope, duration, or geography, the parties intend the court to modify (blue-pencil or reform) the provision to the maximum extent permitted by law rather than void it. Each restriction is independently enforceable, and the unenforceability of any provision shall not affect the remainder."
Pitfall: In a strict red-pencil state (Wisconsin, Nebraska, and a handful of others), an overbroad non-compete is void in its entirety with no reformation. Draft narrowly to the actual legitimate interest from the start.
Carve-out for void states
Explicit recital that the non-compete does not apply to the extent it is unenforceable under applicable state law (especially for employees who may relocate to California).
"This Non-Compete is void and unenforceable to the extent Employee is primarily employed in California, Minnesota, North Dakota, or Oklahoma, or in any other jurisdiction that prohibits post-employment non-competes. Other provisions of this Agreement (including confidentiality, customer non-solicitation, and employee non-solicitation) remain in full force in all jurisdictions to the extent permitted by applicable law."
Pitfall: Without the carve-out, an overbroad jurisdiction-spanning non-compete may give the California court a hook to void the entire restrictive-covenant package under Bus. & Prof. Code §925 (which voids out-of-state choice-of-law for California employees).
Jurisdiction notes
Non-compete law changes constantly. The current (2026) landscape:
- California (Bus. & Prof. Code §§16600–16607): Post-employment non-competes void as a matter of statute (§16600). Permitted in sale-of-business (§16601) and partnership dissolution (§16602) contexts. §16600.1 (effective 2024) requires employers to have notified former employees by Feb. 14, 2024 that any non-compete is void. §925 voids out-of-state choice-of-law for California employees. Penalties for filing or threatening to enforce an unlawful non-compete include the employee's attorneys' fees and disgorgement.
- Minnesota (§181.988, effective July 1, 2023): Statutory ban on post-employment non-competes, prospective only. Pre-July-2023 non-competes remain subject to common-law reasonableness analysis. Sale-of-business carve-out preserved.
- North Dakota (Cent. Code §9-08-06) and Oklahoma (15 Okla. Stat. §219A): Long-standing statutory bans on post-employment non-competes. Sale-of-business carve-outs.
- Massachusetts (G.L. c. 149 §24L, effective October 2018): Five gating requirements: (i) 10-business-day pre-hire notice; (ii) $75,000+ annualized earnings; (iii) garden leave of 50% of salary OR mutually agreed-upon consideration; (iv) right to consult counsel; (v) 12-month maximum duration. Non-compliant non-competes are void in their entirety.
- Colorado (HB 22-1317): Restricts non-competes to "highly compensated" workers ($112,500 for 2024, annually adjusted). Non-solicit caps at "highly compensated" threshold of $67,500. Advance notice required (14 days before earlier of acceptance of offer or first day of work).
- Illinois (820 ILCS 90, Freedom to Work Act): Income threshold of $75,000 for non-competes ($45,000 for non-solicits, both indexed to inflation). 14-day advance notice and right to consult counsel. Continued employment is sufficient consideration only after two years (Fifield).
- Oregon (ORS §653.295): $108,575 (2024) salary threshold; written notice in offer letter at least two weeks before employment start; non-compete maximum 12 months. Without compliance, the non-compete is void.
- Washington (RCW 49.62): Income threshold ($120,560 for 2024 employees; $301,399 for independent contractors), advance notice in writing, garden leave for terminations without cause.
- Federal (FTC Non-Compete Rule, 16 C.F.R. §910): The FTC's nationwide non-compete ban (final April 23, 2024; effective September 4, 2024) was vacated nationwide by the U.S. District Court for the Northern District of Texas in Ryan LLC v. FTC (July 3, 2024). The FTC's appeal to the Fifth Circuit is pending. State law continues to govern in the interim, with significant variation.
- Physician non-competes: DC (since April 2024), New Mexico, Iowa, Indiana, Tennessee, and Minnesota have enacted statutory restrictions or bans on physician non-competes. Many other states impose buyout requirements or shorter maximum durations for healthcare providers.
How to draft your non-compete in LexDraft
Confirm the operative state and threshold
Open LexDraft in Word. Specify the employee's primary work state and annualized earnings. LexDraft flags categorical bans (CA/MN/ND/OK) and applies the operative state's income threshold and gating requirements (MA §24L, CO HB 22-1317, OR ORS §653.295, etc.).
Calibrate scope, duration, and geography
Narrow the restricted activities to specific products or service categories the employee was actually involved in. Set duration to 6-12 months (sales, rank-and-file) or 12-18 months (executive). Set geography to the employer's actual market and the employee's actual territory.
Provide compliant notice and consideration
For new hires: deliver the agreement with the offer letter, satisfying the state's pre-hire notice window (10 business days in MA; 14 days in CO and OR). For existing employees: provide new consideration (signing bonus, promotion, equity grant). Add the void-states carve-out and the blue-pencil clause. Download and execute.
Best practices a sophisticated trade-secret lawyer would actually use
Don't draft a 50-state non-compete
A pan-jurisdictional non-compete is the legal equivalent of a "FOR DECORATIVE USE ONLY" sticker. Build state-specific drafting from the start: California, Minnesota, North Dakota, and Oklahoma get a customer non-solicit and confidentiality only. Massachusetts gets the §24L package. Colorado, Oregon, and Washington get the threshold and notice provisions. Everywhere else, scope and duration are calibrated to the actual role.
Reserve non-competes for the cases where they actually fit
Most "non-compete" problems are really customer-poaching, employee-poaching, or trade-secret problems. The right tools are customer non-solicit, employee non-solicit, and a real trade-secret identification program — all more enforceable than a non-compete. Reserve the non-compete for the small number of senior roles where the legitimate interest cannot be protected any other way.
Use garden leave to convert the non-compete from one-sided restraint to paid contract
Massachusetts requires garden leave; other states increasingly treat it as evidence of reasonableness. Garden leave (50% of base salary during the restricted period) makes the non-compete a paid contract rather than a one-sided restraint and dramatically improves enforcement odds. For executives, fold it into a structured severance: 12 months of severance during the 12-month non-compete period.
Include a tolling clause
Without tolling, the former employee can run the clock during litigation — by the time the TRO is litigated and an injunction issued, the restricted period is half-over. A tolling clause (the restricted period does not run during periods of breach or litigation) converts a 12-month restriction into a real 12-month restriction.
Provide compliant pre-hire notice or it's void
Massachusetts (10 business days), Oregon (2 weeks), Colorado (14 days) all require pre-hire notice. Send the non-compete with the offer letter, not the employment agreement on the start date. Calendar the notice window into recruiting.
Document the legitimate business interest specifically
"Trade secrets and customer goodwill" recital language is too generic to survive scrutiny. Identify the specific information (e.g., "the customer pricing matrix, account-level acquisition cost data, and the proprietary model used to predict customer churn"), the specific customer relationships, and the specific training. Specificity converts the recital from boilerplate to evidence.
Add a void-states carve-out
An overbroad jurisdiction-spanning non-compete can give a California court (under §925) the hook to void the entire restrictive-covenant package. Add an express carve-out for California, Minnesota, North Dakota, Oklahoma, and any jurisdiction that prohibits post-employment non-competes — and confirm that confidentiality and non-solicit obligations remain in force everywhere.
For sale-of-business: longer, broader, fully enforceable
The single non-compete context that courts universally enforce is the sale-of-business non-compete (CA §16601, similar carve-outs in every other state). Duration of 3-5 years and broad geography are routinely upheld because the seller received purchase consideration. If you can structure as a sale (asset purchase, stock purchase, dissolution buyout), the non-compete becomes uncontroversial.
Frequently Asked Questions About Non-Compete Agreements
California (Bus. & Prof. Code §16600, expanded by §16600.1 in 2024 — employers must have notified former employees by Feb. 14, 2024 that any non-compete is void); Minnesota (§181.988, effective July 1, 2023, prospective only); North Dakota (Cent. Code §9-08-06); Oklahoma (15 Okla. Stat. §219A). Narrow sale-of-business and partnership-dissolution carve-outs exist in each. The FTC's nationwide non-compete ban (final 2024) was vacated by the Northern District of Texas in Ryan LLC v. FTC (July 3, 2024); the appeal is pending in the Fifth Circuit. Several other states (CO, IL, ME, MD, NH, OR, RI, VA, WA) restrict non-competes to high earners. Massachusetts has its own §24L gating regime.
Massachusetts G.L. c. 149 §24L imposes five gating requirements: (i) 10-business-day pre-hire notice; (ii) annualized earnings of at least $75,000 (higher for some occupations); (iii) garden leave equal to 50% of the highest annualized base salary during the last two years OR "mutually agreed-upon consideration" specified in the contract; (iv) right to consult counsel; (v) duration cap of 12 months. Non-compliant non-competes are void in their entirety. Non-solicits and confidentiality agreements are not subject to §24L. The 10-business-day notice cannot be cured retroactively — sending the offer letter and the non-compete on the same day for execution at the start date voids the non-compete.
Garden leave is contractual continued compensation during the post-employment restricted period — the former employee is paid not to work for a competitor. Massachusetts G.L. c. 149 §24L requires 50% of base salary during the restricted period (or "mutually agreed-upon consideration" specified in the contract). Other states do not mandate garden leave but increasingly use it as evidence of reasonableness; some Pennsylvania and New York judges treat garden leave as a near-prerequisite for enforcing executive non-competes. Garden leave converts the non-compete from a one-sided restraint into a paid contract — far more enforceable, and aligns the employer's enforcement incentive with the employer's willingness to pay for the protection.
Effectively, no — but it tried. The FTC's final Non-Compete Rule (16 C.F.R. §910) was issued April 23, 2024, with an effective date of September 4, 2024. It would have banned nearly all post-employment non-competes nationally and required employers to notify workers that existing non-competes were void. The U.S. District Court for the Northern District of Texas vacated the rule nationwide in Ryan LLC v. FTC (July 3, 2024) on the ground that the FTC exceeded its statutory authority under §5 of the FTC Act. The FTC's appeal is pending in the Fifth Circuit. State law continues to govern in the interim, and several states (CA, MN, etc.) have moved independently toward stricter restrictions, so the practical drafting landscape continues to tighten.
Yes — but new consideration is required in most states beyond continued employment. Acceptable consideration: a promotion, raise, bonus, equity grant, or a defined garden-leave payment. Pennsylvania (Socko v. Mid-Atlantic Systems, 2015), Texas, and Florida treat continued at-will employment as sufficient consideration. Illinois (Fifield v. Premier Dealer Services, 2013) requires at least two years of continued employment to make continued employment sufficient; below that, additional consideration is required. Wisconsin and Minnesota require new consideration in nearly all cases. The cleanest "new consideration" is a one-time signing bonus tied to execution.
A non-compete restricts the former employee from working in a competitive role for a defined period and geography. A customer non-solicit restricts soliciting customers of the former employer. An employee non-solicit restricts recruiting former colleagues. A confidentiality agreement restricts use or disclosure of confidential information. Non-competes are the most restrictive and most disfavored; customer non-solicits are more readily enforced; confidentiality is broadly enforceable everywhere. The best post-departure protection package usually pairs a customer non-solicit (12-24 months, scoped to customers the employee had material contact with) with strong confidentiality and an employee non-solicit — without relying on a non-compete at all.
Yes — even in states that void operating-context non-competes. California Bus. & Prof. Code §16601 (sale of business) and §16602 (partnership dissolution) expressly permit non-competes, and every other state has similar carve-outs. The rationale: the seller received purchase consideration for the value of the business and its goodwill, including the seller's commitment not to immediately compete with the buyer. Sale-of-business non-competes are routinely upheld with durations of 3-5 years and broad geographic scope matched to the territory of the business sold. Same logic applies to founders selling their stake in an acquired company — the buyer's protection of the goodwill it just paid for is a legitimate interest courts respect.
Draft a state-aware non-compete in Word
LexDraft flags categorical bans (CA/MN/ND/OK), applies the operative state's income threshold and gating mechanics (MA §24L, CO HB 22-1317, OR ORS §653.295), and builds the customer non-solicit and confidentiality package alongside.
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