Noncompete Laws by State
Employers seeking to protect their legitimate business interests may require their employees to sign a noncompete agreement. However, there is no federal or uniform law governing the interpretation of noncompetition provisions in employment contracts across the country. Rather, noncompete clauses or agreements are governed by state law and, thus, what is enforceable in one state may be prohibited in another. As a result, an employer needs to be aware of the noncompete laws in each state in which it employs workers. This chart covers the following key requirements and enforceability considerations:
- Whether a noncompete agreement is generally enforceable in a particular state;
- Industry-specific restrictions, with the exception of the prohibition of noncompetes for lawyers;
- Notification requirements prior to commencement of employment;
- Whether at-will employment is sufficient consideration for a noncompete at the time of hire;
- Whether continued at-will employment is sufficient consideration for a noncompete that is executed during employment; and
- Whether a state allows a court to modify a noncompete if a portion of the noncompete is void or unenforceable, such as by rewriting the offending provisions (reformation) or striking offending provisions (blue pencil).
- In "Blue Pencil" states, courts may use discretion to rewrite offending (typically overbroad) provision(s) so that they conform to state law. These states are marked as "Yes" in the Court Modification column.
- In "Strict Blue Pencil" states, courts may strike the offending provision(s) and assess enforceability based on whatever remains of the provision. A court may not rewrite or add language to the provision to make it enforceable. These states are marked as "Limited" in the Court Modification column.
- In "No Blue Pencil" states, courts may void the entire noncompete if any part does not comply with state law enforceability standards. These states are marked as "No" in the Court Modification column.
In some states, the law on any of the above points may be unclear. The law may be unclear because:
- There is no statute or court decision that directly addresses this issue;
- There may be relevant decisions, but the outcome did not definitively decide the issue; or
- There may be conflicting decisions on the topic.
A cell marked with "N/A" signifies that the state's law does not address a particular requirement or enforceability consideration.