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How Do U.S. States Deal with Non-Compete Agreements?


Question: How Do U.S. States Deal with Non-Compete Agreements?
Each U.S. state has different laws regarding non-compete agreements. These agreements are placed in employment contracts and business sale contracts to restrict the former employee or former owner from competing.

The restrictions on non-compete agreements relate to the possibility that an unreasonable non-compete may constitute restraint of trade or the attempt to create a monopoly.


U.S. State Laws Concerning Non-Compete Agreements
Here is a listing of U.S. states which disallow or restrict non-compete agreements. The information is the result of prior court cases litigated in each state, and in some cases is based on state laws. ("NCA" stands for Non-compete Agreement.) This listing was current as of October 2009 but you should check with your state to see if there have been changes:

  • Arizona - not allowed for broadcast employees
  • California - "every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void."
  • Delaware - not allowed for physicians
  • Florida - disallowed in "any contract ..." (see California language)
  • Georgia - NCA's are enforceable if they restrain "in a reasonable manner"
  • Hawaii - NCA's are enforceable unless their effect is to lessen competition or create a monopoly
  • Illinois - Not allowed for broadcasting employees
  • Louisiana - "every contract" is null and void
  • Maine - broadcasting situations presumed unreasonable
  • Massachusetts - contracts involving broadcasting personnel deemed void and unenforceable
  • Missouri - NCA is enforceable if it meets "statutory criteria" elsewhere in MO code
  • Montana - NCA acceptable in sale of goodwill of a business or in a partnership dissolution
  • New Hampshire - unfair to impose "unreasonable restrictions" on motor vehicle dealer or franchisee
  • New York - "every contract" unenforceable; broadcasting - can't require as a condition of employment
  • North Dakota - unenforceable in every contract except a contract for sale of a business or the dissolution of a partnership
  • Oklahoma - can't make NCA a precondition of employment, but can keep employee from direct soliciation of established customer of former employer
  • Oregon - NCA customers of former employers / "voidable" unless meets specific requirements laid out in Oregon code
  • South Carolina - trade secret agreement not void, unenforceable or against public policy if it doesn't include durational or geographic limits ????
  • South Dakota - in business sale (goodwill) may agree to refrain from carrying on similar business / partnership in dissolution / ok in employment agreements
  • Texas NCA enforceable if ancillary to an otherwise enforceable agreement at the time the agreement was made
  • Washington - NCA void/unenforceable if employee is terminated without just cause or is laid off (in broadcasting industry)
  • Wisconsin - NC covenant by assistant, servant, or agent is lawful
  • Guam - void if restrains person from exercising lawful profession, trade, or business

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