Free non-compete agreement template

Where federal law stands, as of August 2026

This is the part most pages get wrong, so here it is in order. In April 2024 the Federal Trade Commission issued a rule that would have banned most non-competes nationwide. It never took effect. In August 2024, in Ryan LLC v. FTC, a federal district court in Texas set the rule aside on a nationwide basis, holding the FTC lacked authority to issue it. In September 2025 the FTC voted to dismiss its appeals and accept that outcome. On February 12, 2026 the rule was removed from the Code of Federal Regulations altogether. So there is no federal ban, and no pending FTC rulemaking to create one; reviving it would take new rulemaking or an act of Congress. A bill to ban most non-competes federally was introduced in June 2025 and has not advanced. But do not read that as the FTC losing interest, because it moved from rulemaking to enforcement. It now challenges individual employers under the FTC Act.

• In September 2025 the FTC filed against a pet cremation company over nationwide non-competes covering roughly 1,780 employees; the final order in November 2025 required it to stop enforcing them, notify affected workers, and file compliance reports for nine years.
• In April 2026 the FTC acted against Rollins, the pest-control group behind Orkin, over non-competes covering more than 18,000 employees that ran two years and 75 miles from any of its 700-plus locations. The final consent order came in June 2026 with a ten-year term, and the FTC sent warning letters to 13 other companies in the same industry.
• The FTC also ran a public request for information on non-competes in late 2025 and sent warning letters to large healthcare employers and staffing firms.
• The takeaway for employers: a blanket non-compete applied to an entire workforce without regard to role is now the fact pattern the FTC targets, even without a rule.

Which states ban non-competes

A small group of states make non-competes unenforceable for nearly all employees, and the list is longer than most articles show because two states were added recently. California, Minnesota, North Dakota, and Oklahoma are the long-standing bans. Wyoming joined them with a law effective July 1, 2025, though it applies only to agreements signed on or after that date and keeps exceptions for the sale of a business, protection of trade secrets, recovery of training or relocation costs, and executive and management personnel. Washington has gone furthest of all: legislation signed in March 2026 replaces its income-threshold system with a near-total ban effective June 30, 2027, reaching agreements signed before that date, with employers required to notify affected workers by October 1, 2027.

• California is the strictest. Section 16600 of the Business and Professions Code voids employment non-competes no matter how narrowly they are drafted. Section 16600.5 makes such a contract unenforceable regardless of where or when it was signed, makes it a civil violation to enter into or try to enforce one, and gives employees, former employees, and even prospective employees a private right of action for injunctive relief or actual damages, with attorney fees for a prevailing plaintiff.
• California also required employers to send individualized written notice, by February 14, 2024, to current employees and to former employees employed after January 1, 2022, telling them their non-compete is void.
• Minnesota's ban covers agreements signed on or after July 1, 2023, with narrow exceptions for the sale or dissolution of a business.
• Florida moved the other way. Its CHOICE Act, effective July 1, 2025, strengthens enforceability for higher earners, allows terms up to four years, and creates a presumption that a covered agreement is enforceable. The trend is not one-directional.

States that allow non-competes only above an income threshold

A second group permits non-competes only for employees earning above a set figure, and those figures move. Some are indexed to inflation and change every January, others step up on a schedule written into the statute, so a number you found last year is probably wrong. As of 2026, Colorado sets the threshold at $130,014, with a lower figure of $78,008.40 for customer non-solicitation covenants and a penalty of $5,000 per worker for violations. Oregon sits at $119,541 and adds procedural requirements: a twelve-month maximum, advance written notice, and a signed copy delivered to the employee within 30 days of termination. Illinois takes the other approach, moving by statute rather than inflation, from $75,000 now to $80,000 on January 1, 2027. Washington's threshold is $126,858.83 for employees until its ban takes over in 2027, and the District of Columbia uses $162,164 generally with a higher figure for medical specialists. Maine, Maryland, Rhode Island, and Virginia have their own numbers. One caution that says a lot about this area: when we checked, Oregon's own labor bureau page was still displaying the prior year's figure. Verify the current number for your state before relying on it, and diary a re-check each January.

Occupation bans, especially in healthcare

Even in states that generally allow non-competes, particular occupations are often carved out, and healthcare is where most of the recent movement is. Alabama, Arkansas, Delaware, Indiana, Louisiana, Massachusetts, New Mexico, Pennsylvania, Tennessee, Texas, and West Virginia all restrict or ban physician non-competes in some form, with several capping duration and distance rather than banning outright. Maryland bars them for healthcare workers below an income line and limits them above it. Montana extended its ban to all physicians effective January 1, 2026, and Utah passed several healthcare measures in 2026, including one that went the other way by loosening restrictions for certain platforms. Outside healthcare, broadcasters are protected in Arizona, Connecticut, Illinois, Maine, New York, and Utah, and various states carve out security guards, veterinarians, auto salespeople, and hourly workers. Lawyers sit in a category of their own: under the ABA Model Rule of Professional Conduct 5.6, adopted in some form by the states, a lawyer may not make or offer an agreement restricting their right to practice after the relationship ends, other than one about retirement benefits. The reasoning is that it restricts not just the lawyer but the client's freedom to choose counsel.

What makes a non-compete enforceable

In states that allow them, courts apply a version of the same common-law test, and a non-compete has to clear all of it. First, it must protect a legitimate business interest: trade secrets, confidential business information, or customer goodwill. An employee's general skill, training, and experience is not a protectable interest, and an agreement aimed at that alone tends to fail. Second, it must be reasonable in duration. Six months to two years is the usual range, and one year is the common landing spot. Third, it must be reasonable in geography, tied to where the employer actually operates and where this employee could realistically cause harm. Fourth, it must be reasonable in the scope of activity restricted, and this is where most templates fail: barring someone from any role at any competitor, rather than from the specific work they actually did, is the most common defect. Finally, it must not impose undue hardship on the employee or harm the public, which is the thinking behind the physician carve-outs. This template is drafted to that test, which is why its restrictions are defined by the work the employee actually performed and the territory they actually covered rather than by the employer's whole industry.

What happens when a non-compete is too broad

This is worth knowing before you draft, because it decides whether an overbroad clause gets fixed or destroyed, and states take three different approaches. Under the strictest, sometimes called the red pencil approach, an overbroad covenant is void in its entirety and the court will not save it; Nebraska is the standard example, on the reasoning that rewriting the parties' contract is not a judicial function. Under the strict blue pencil approach, a court may delete offending words but may not add, change, or rearrange language, so the clause survives only if it happens to be severable as written. That is why careful drafters use step-down clauses offering progressively narrower alternatives. Under reformation, sometimes called equitable modification, a court may rewrite the restriction to something reasonable and enforce it as rewritten; this is the majority approach, though some states will only do it if the employer drafted in good faith. Note that the phrase blue pencil gets used loosely, and many sources use it to describe reformation, which is a different thing. The practical lesson is the same either way: an aggressive clause is a gamble whose downside depends entirely on which state you land in, and drafting narrowly in the first place costs nothing.

Consideration: what the employee gets in exchange

A non-compete is a contract, so the employee has to receive something of value for it. When the agreement is signed at hire, the job offer itself generally supplies that, which is why the cleanest approach is to present the agreement with the offer letter and before the start date. The harder case is asking an existing employee to sign one, and states genuinely split on it. Some hold that letting the employee keep their job is not enough on its own and require something new, such as a raise, bonus, promotion, or equity grant. Pennsylvania takes that position, requiring tangible new consideration. Illinois has gone further and treated continued at-will employment as inadequate unless the employee stays for a substantial period, generally around two years, absent separate consideration. Other states accept continued employment alone. Because you cannot count on which rule applies, and because the cost of being wrong is that the entire agreement fails, this template's existing-employee option requires you to write down the new consideration and its value. If you are rolling out agreements to a current workforce, attach something real to them.

Non-compete vs. NDA vs. non-solicitation

These three get lumped together and they do different jobs. A confidentiality agreement, or NDA, protects information: the employee can work wherever they like, but cannot take or use your confidential material. A non-solicitation agreement protects relationships: the employee can work for a competitor, but cannot go after your customers or recruit your staff. A non-compete restricts employment itself, which is why it is the most heavily regulated of the three and the one courts scrutinize hardest. As a rule, the narrower tools are easier to enforce and often get you most of what you actually need, so the honest advice is to reach for a non-compete only when confidentiality and non-solicitation genuinely will not do the job, and to use all three together rather than relying on the non-compete alone. One caution: the narrower tools are increasingly regulated too. Colorado and Illinois set income thresholds for customer non-solicitation covenants, some states now restrict non-solicits and even confidentiality agreements for particular occupations, and a confidentiality agreement drafted so broadly that it functions as a disguised non-compete will be treated as one.

Trade secret law does a lot of this work already

Before reaching for a non-compete, remember that trade secret law protects the underlying asset without restricting where anyone can work. The federal Defend Trade Secrets Act, enacted in 2016, created a federal civil claim for trade secret misappropriation, and nearly every state has adopted a version of the Uniform Trade Secrets Act; New York is the notable holdout, using common-law rules instead. Two points matter here. First, these protections apply whether or not anyone signed a non-compete, so the employer with good confidentiality practices is not defenceless in a state that bans them. Second, the federal statute deliberately limits what a court can order: an injunction may not prevent a person from entering an employment relationship, and any conditions placed on employment must rest on evidence of threatened misappropriation rather than merely on what the person knows. That is Congress declining to let trade secret law become a back-door non-compete, and it is a useful thing to understand before assuming that knowledge alone can keep a former employee out of the market.

Common mistakes to avoid

Non-competes fail for a predictable set of reasons.

• Using one at all in a state that bans them, which in California is itself a civil violation and gives the employee a claim with attorney fees.
• Applying the same blanket agreement to an entire workforce regardless of role, which is precisely the pattern the FTC has been targeting.
• Restricting any role at any competitor instead of the specific work the employee actually performed.
• Setting a territory covering everywhere the employer does business rather than where this employee worked.
• Asking an existing employee to sign without giving anything new, in a state that requires new consideration.
• Relying on a number from an article rather than the current threshold in the employee's state, since several change every January.
• Assuming a choice-of-law clause solves the problem, when several states apply their own law to protect workers who live or work there, and California voids covered agreements no matter where or when they were signed.

Before you use this template

Use this as a starting point, not a finished document, because this is one of the few areas where a form filled in without checking local law can be worse than no agreement. Confirm three things first. Whether the employee's state permits non-competes at all. Whether the employee is above any applicable income threshold and outside any occupation carve-out. And whether your state reforms an overbroad restriction or voids it, since that decides how much drafting risk you can afford. Have an employment lawyer in the relevant state review the agreement before rolling it out, especially across multiple states, where the honest answer is usually that you need different terms in different places rather than one national form. And date your review: this area produced dozens of bills and several new laws in the last year alone, and thresholds move every January.