Overview: One type of employment contract is the noncompete agreement. A noncompete agreement prevents an employee from pursuing a similar profession or trade in competition against the employer (usually post-employment). Noncompetition agreements are used to discourage an employee from working for a competitor using the specialized knowledge, skills, or confidential information gained while working for the employer.
The majority of the states recognize and enforce various forms of noncompete agreements. Generally, the terms of a noncompete agreement will only be enforced to the extent necessary to protect the employer's legitimate business interests. Most states will enforce a noncompete agreement if contains reasonable limitations as to the geographical area and time period in which an employee may not compete with the employer.
Trends: Several states have either passed or are considering legislation that would change how noncompete agreements are regulated. For instance, Illinois became one of the first states to ban noncompetes for low-wage workers. Also, in 2016 several states enacted laws prohibiting physician noncompete agreements. Further, a few states have passed laws limiting the duration of noncompete agreements.
Author: Melissa A. Silver, JD, Legal Editor
Updated to reflect noncompete law, effective January 15, 2020.
Updated to reflect Rhode Island noncompete restrictions, effective January 15, 2020.
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Updated to reflect amendments regarding noncompete agreements and restrictive covenants for personal support workers, effective January 1, 2020.
Updated to reflect state law provisions governing noncompete agreements, effective January 1, 2020.
Updated to reflect the final overtime rule updating and revising the Fair Labor Standards Act (FLSA) overtime exemption requirements, effective January 1, 2020.
Updated to include amended handbook-related provisions in law regarding reproductive health decisions.
The restrictive covenant and confidentiality agreement may be used by a Florida employer to protect its business interests.
The restrictive covenant and confidentiality agreement may be used by a Texas employer to protect its business interests.
The restrictive covenant and confidentiality agreement may be used by a New York employer to protect its business interests.
Guidance for HR on the use of noncompete agreements to prevent employees from competing with the employer.