A non-compete agreement is a legal contract restricting an employee's ability to work for competitors or start competing businesses for a specified period after leaving employment. While these agreements can help protect business interests, their enforceability varies dramatically by state. Some jurisdictions ban non-compete agreements entirely, while others impose strict limitations on their use.
How Common Are Non-Compete Agreements?
Non-compete agreements are widespread across American workplaces. Research shows that approximately 18% of U.S. workers are currently bound by non-compete agreements and 38% have signed one at some point during their careers, according to a study published in the Journal of Law and Economics.
Perhaps more surprisingly, nearly half of businesses report having at least some employees under non-compete agreements, according to the Economic Policy Institute. These agreements are found across all wage levels and industries, including restaurant managers, retail supervisors, and service industry workers.
State-by-State Variations
The enforceability of non-compete agreements depends almost entirely on where your business operates. As of 2025, the legal landscape includes:
States with complete bans: Six states do not enforce non-compete agreements at all: California, Minnesota, Montana, North Dakota, Oklahoma, and Wyoming. In these states, non-competes are generally void and unenforceable, according to Frost Brown Todd's 2025 analysis.
States with income thresholds: Many states only allow non-competes for employees earning above specific wage thresholds. For example, Illinois prohibits non-competes for employees earning $75,000 or less annually, while Massachusetts requires employers to pay "garden leave" (continued salary during the restriction period), according to state law summaries from Journey Payroll.
States with industry-specific restrictions: Healthcare workers face particular protections. Maryland, Arkansas, and Indiana have all enacted laws banning or severely restricting non-competes for physicians and healthcare providers, as detailed in Frost Brown Todd's mid-year 2025 update.
States with duration limits: Oregon caps non-compete duration at 12 months post-employment, while Kansas limits employee non-competes to two years maximum.
Key Elements of Enforceable Non-Competes
For states that do enforce non-compete agreements, courts typically require three elements to uphold them:
Reasonable geographic scope: The restricted area must align with where the business actually operates. A restaurant chain with locations in three counties cannot reasonably restrict an employee from working anywhere in the entire state.
Reasonable duration: Most courts view 6 to 24 months as reasonable. Agreements extending beyond two years face increased scrutiny and may be deemed excessive.
Legitimate business interest: Employers must demonstrate they're protecting trade secrets, confidential information, specialized training investments, or established customer relationships.
The Problem with Non-Competes in Frontline Work
While non-competes were historically reserved for executives with access to trade secrets, they've expanded to cover workers at all levels. Research reveals troubling patterns:
Only 10% of employees negotiate the terms of their non-compete agreements, and approximately one-third are presented with these agreements only after accepting a job offer, according to the Journal of Law and Economics study. This timing eliminates meaningful negotiation and places workers in difficult positions.
For hourly restaurant workers, retail associates, or service employees, non-competes often serve little legitimate purpose. A line cook or cashier typically doesn't have access to genuine trade secrets that warrant restricting their future employment options. Many states have recognized this imbalance and enacted worker protections accordingly.
Federal Attempts to Ban Non-Competes
In April 2024, the Federal Trade Commission attempted to ban most non-compete agreements nationwide, estimating that such a ban would increase worker earnings by nearly $300 billion annually. However, federal courts in Texas and Florida blocked the rule from taking effect, as reported by SHRM.
Under the current administration, the likelihood of a federal non-compete ban has diminished significantly. This means employers must continue navigating the complex patchwork of state laws, particularly those operating across multiple jurisdictions.
Alternatives to Non-Competes
Rather than relying on difficult-to-enforce non-compete agreements, multi-location businesses have more effective options:
Non-disclosure agreements (NDAs): These protect confidential information, trade secrets, and proprietary business data without restricting where employees can work. Courts generally view NDAs more favorably than non-competes.
Non-solicitation agreements: These prevent former employees from actively recruiting your current staff or soliciting your established customers, protecting your actual business relationships without preventing someone from working in their field.
Customer non-solicitation clauses: Specifically prohibit former employees from taking your customer lists or targeting your established client relationships, which directly protects your business investments.
Trade secret protection: Utilize strong confidentiality policies, secure document management, and limited access to sensitive information to protect what truly matters.
Best Practices for Multi-Location Businesses
If your business operates in multiple states, your non-compete strategy must account for varying state laws:
1. Know your jurisdiction: Regularly review the laws in every state where you employ workers. State legislatures continue enacting new restrictions, so look out for any changes.
2. Tailor agreements by location: Rather than using a one-size-fits-all approach, customize non-compete provisions to comply with the specific requirements of each state where employees work.
3. Consider whether it's truly necessary: Ask whether a non-compete genuinely protects legitimate business interests or simply restricts employee mobility. For most frontline positions in restaurants, retail, and service industries, NDAs and non-solicitation agreements provide adequate protection.
4. Provide adequate consideration: Some states require that employees receive something of value beyond continued employment in exchange for signing a non-compete. This might include a signing bonus, promotion, or access to specialized training.
5. Present agreements early: Provide non-compete agreements before the employee accepts the job offer, ideally with the initial offer letter. This allows meaningful review and negotiation.
Managing Employee Transitions Without Non-Competes
For businesses in states where non-competes are banned or heavily restricted, focus on these strategies:
Protect information systematically: Use digital platforms like Breakroom to control access to sensitive business communications or documents. Limit customer data, financial details, and operational procedures to only those employees who genuinely need them.
Document everything: When employees leave, conduct thorough exit interviews and clearly document which company property, keys, access credentials, and information they've returned.
Build strong workplace culture: The most effective retention tool is creating a workplace where people want to stay. Employees who feel valued, fairly compensated, and connected to their team are less likely to leave in the first place.
Maintain customer relationships: Don't let individual employees become the sole point of contact for important customer relationships. Rotate responsibilities and ensure multiple team members know key clients.
The Bottom Line
Non-compete agreements remain a valid tool for protecting legitimate business interests in many states, but their effectiveness and enforceability continue declining. The trend across the United States clearly favors worker mobility and restricts employers' ability to limit where former employees can work.
For restaurant chains, retail operations, and service businesses employing hourly workers across multiple locations, focusing on information protection through NDAs, non-solicitation agreements, and strong operational practices typically provides better protection than attempting to enforce non-competes that may not hold up in court.
Consult with an employment attorney familiar with the specific laws in your operating jurisdictions to develop a legally compliant approach that genuinely protects your business interests without exposing you to legal challenges or making it unnecessarily difficult for workers to earn a living.
