Non-Compete Agreements: Purpose and Requirements
Written by Law on Call Staff | Last Updated December 12, 2025
Valid non-compete agreements can help businesses protect the time they’ve invested in training employees. But these contracts are complex, the rules vary, and plenty of missteps can render them invalid.
Below, we’ve answered common questions about non-compete agreements to help get you started.
Main Takeaways
- Attempts to ban non-competes nationwide have stalled, and they remain valid in many states.
- Non-compete agreements are complicated, and numerous rules must be adhered to for them to hold up.
- At minimum, a non-compete must be rendered in pursuit of a legitimate employer interest, as well as meet timing and geographic restrictions.
What is a Non-Compete Agreement?
A non-compete agreement is a contract between an employer and employee. In it, the employee agrees they won’t provide products, processes, or services that are similar to those provided by the employer. While most non-competes take effect post-employment, some may be active while an employee is still employed.
Non-compete agreement rules vary by state. Some states have banned them outright, and others in part. In states where the contract is allowed, it can generally be written or oral (but some situations require a written agreement).
The Purpose of Non-Compete Agreements
Non-compete agreements help ensure employees don’t compete with their employers or former employers under certain conditions. Competition can occur when people gain skills and knowledge while working, then leave for a competitor or to start a business.
When Are non-compete agreements useful?
Non-competes are more common in these types of situations:
- Specialized work. A non-compete agreement can be useful when work is highly specialized or the industry is highly competitive. Employers invest ample time and resources into their employees in these situations, and losing that value can be tough.
- Selling a business. When a business is sold, if the seller continues to operate in that industry, the buyer automatically has a competitor who’s familiar with their client base. That can decrease the value of the purchased business, so the buyer may wish to put a non-compete in place.
When Are non-competes less useful?
When jobs require less specialized skills and knowledge, non-competes are likely unnecessary. They may not even be legal for entry-level or low-wage positions. Some states have set minimum compensation requirements for a non-compete to be enforceable.
More broadly, non-competes were historically viewed more favorably than they are today. Attempts at nationwide bans, though unsuccessful, have furthered this feeling. Though non-competes remain legal under certain circumstances in some states, the laws continue to get more nuanced.
Know what you’re signing before you sign.
Requirements of a Valid Non-Compete Agreement
In states where allowed, a valid non-compete must meet several criteria. Even if allowed, and income requirements are met, other necessary elements vary.
What to Include in a NOn-Compete
Most states require non-compete agreements to address the following:
- Temporal Duration
A non-compete agreement will only be valid for a reasonable length of time. Most states don’t allow a non-compete to last longer than 6 months to a year. - Geographic Scope
A non-compete agreement is only valid within a reasonable geographic boundary. This is often written out in miles from the employer’s business. - Further a Legitimate Employer Interest
The non-compete cannot be arbitrary. If it’s purpose doesn’t serve a legitimate interest of the employer, it is likely invalid.
Different non-competes call for different information, but in general, you must also include:
- Damages
What the employer is entitled to if the employee violates the agreement. - Parties
The employer and employee. - Scope
Non-competes must be specific as to the restricted work and/or services. - Competition
Describes the types of businesses and industries the employee is prohibited from working in after leaving.
How is a non-compete’s Validity determined?
Each state has their own rules that determine what “reasonable” means regarding a non-compete’s validity, and in what instances such a contract may be void.
Here are a few examples:
- Utah: The more local the interest protected, the more narrowly drawn the geographic limitation of the non-compete must be. If an agreement turns out to be invalid, the employer must pay all employee litigation costs and fees.
- Florida: Most non-compete agreements lasting six months or less are presumed to be reasonable, and those lasting two years or more are presumed to be unreasonable.
- Oregon: Employees must be informed of non-competes, in writing, two-weeks prior to their first day on the job. The non-compete must comply with monetary constraints, limited to high earners (the threshold is recalculated annually).
- Illinois: A non-compete is void if it imposes “undue hardship” on the employee.
Should a non-compete agreement be written or oral?
In most cases, non-compete agreements can be written or oral. However, oral agreements can be harder to enforce because it’s difficult to prove the terms of an oral contract. Additionally, the enforceability of an oral contract is an uncertain, expensive, and time consuming process. So while oral contracts exist, any contract worth making is worth putting in writing.
The Statute of Frauds says that some contracts must be in writing, including agreements that cannot be completed within one year of their creation. So in the few states that allow non-competes to extend beyond one year, the agreement must be in writing.
How can I make sure my non-compete is enforceable?
Simply having non-competes in place does not guarantee they’re enforceable. To protect your company, it’s important to make sure non-competes are up-to-date, comply with geographic and timing restrictions, and that they’re in line with current rules and laws.
Some states do allow provisions that existed at the time the contract was signed, so be sure to know local laws.
Additional considerations:
- Be careful about enforcing potentially non-compliant agreements, for which employees can potentially recover attorney’s fees.
- Ensure a reasonable connection to legitimate employer interest is being protected.
- Review the uniqueness of the employee’s position. Are they in a position that requires special skills or training? Or are they easily replaceable?
- Pay for training and development to stay informed of new non-compete laws.
Whether you’re an employer or an employee, it’s best to consult with an attorney in your state regarding the enforceability of a non-compete
Frequently Asked Questions
Yes. In states where allowed, an employer can make signing a non-compete a requirement for employment. If you choose not to sign, you may not be eligible for the position.
To get out a non-compete after it’s been signed:
- Employees and former employees will likely need to take legal action against the employer.
- Then, the non-compete will need to be found unenforceable for one reason or another. For example, a non-compete might be void if it imposes undue hardship on the former employee.
Where state law permits non-competes, to be enforceable the contract must be:
- Reasonable in how long it lasts and what geographic scope it covers
- In service of a legitimate employer interest
It depends. To collect the damages outlined in the non-compete agreement, the former employer will likely be required to sue the former employee. If the employer doesn’t pursue their claim, the employee may not suffer the consequences. But the potential liability for breaching any contract, including a non-compete, is often not worth the risk.