Non-Compete Agreements Across the United States: A State-by-State Guide for Employers and Workers in 2026

When the Federal Trade Commission issued its final rule banning non-compete agreements in April 2024, many employers and employees expected a uniform national standard. That expectation was short-lived. A federal district court in Texas blocked the rule in August 2024, and the Fifth Circuit dismissed the FTC's appeal in September 2025. The FTC subsequently abandoned its defence of the rule under Chair Andrew Ferguson's leadership, returning the regulation of non-compete agreements entirely to the states.

The result is a patchwork that varies dramatically by jurisdiction. Some states impose outright bans. Others permit non-competes only above certain income thresholds. A growing number restrict them in specific industries, particularly healthcare. Employers operating across state lines and workers considering career moves must understand this varied terrain. This article maps the current state of non-compete law as of early 2026.

The Federal Ban That Never Was

The FTC's April 2024 rule was framed as a sweeping measure under Section 5 of the FTC Act. It declared non-compete agreements an unfair method of competition and prohibited employers from entering into or enforcing them, with a narrow exception for existing agreements with senior executives. The rule was to take effect on 4 September 2024.

The Northern District of Texas, in Ryan LLC v. FTC, issued a nationwide stay and subsequently vacated the rule, finding that the FTC lacked the statutory authority to issue such a regulation. The FTC appealed to the Fifth Circuit but dropped the appeal in September 2025. Under the current administration, the Commission has stated it will pursue targeted enforcement actions under existing Section 5 authority rather than attempting another rulemaking.

The FTC has not abandoned the issue entirely. Chair Ferguson announced a shift toward case-by-case enforcement, with a particular focus on non-compete agreements in the healthcare sector. The Commission sent letters to several large healthcare employers and staffing firms urging them to review their employment agreements. However, no broad prohibition is on the horizon at the federal level, making state law the primary governing framework.

States That Ban Non-Competes Entirely

Six states prohibit non-compete agreements in all or virtually all employment contexts. California has the longest-standing ban, rooted in Business and Professions Code Section 16600, which has been in effect for over 150 years. A 2024 amendment reinforced the ban by making it enforceable regardless of where the agreement was signed, closing a loophole that some employers had used by including choice-of-law provisions directing disputes to more permissive jurisdictions. Employees whose employers attempt to enforce a non-compete in California may sue for damages and recover attorney fees.

Minnesota enacted its ban effective 1 July 2023, covering both employees and independent contractors. The state still permits non-solicitation agreements and protections for trade secrets, drawing a clear line between restricting competition itself and protecting legitimate business interests. North Dakota, Oklahoma, Montana, and Wyoming round out the list of states with general prohibitions, though each has nuances around permissible restrictive covenants that fall short of a full non-compete.

Income Threshold States: Protection for Lower-Wage Workers

A dozen states take a middle path, prohibiting non-competes for workers earning below a specified income threshold while permitting them for higher earners. The logic is straightforward: lower-wage workers have less bargaining power, fewer resources to litigate, and less access to the kinds of proprietary information that non-competes are designed to protect.

Illinois bans non-competes for workers earning less than 75,000 dollars annually. That figure will rise to 80,000 in 2027 and 85,000 in 2032, with further increases scheduled through 2037. Oregon sets its threshold at 116,427 dollars, adjusted annually for inflation. The District of Columbia has the highest threshold in the country at 162,164 dollars for 2026, also inflation-adjusted. Virginia, effective 1 July 2025, protects employees earning below the state average weekly wage and those entitled to overtime under the Fair Labor Standards Act.

Colorado, Maine, Maryland, Massachusetts, Nevada, New Hampshire, Rhode Island, and Washington each apply their own thresholds, creating a complex mosaic for multi-state employers. A non-compete that is enforceable for an employee in Florida may be void for a colleague in the same role based in Illinois, solely because of the income threshold difference. Employers with distributed workforces must audit their agreements state by state.

Healthcare: The Fastest-Growing Restriction

At least sixteen states now restrict non-compete agreements specifically in the healthcare sector. The trend reflects concerns that physician and nurse non-competes fragment patient care, create provider shortages in underserved areas, and inflate healthcare costs by reducing labour market competition.

Indiana expanded its physician protections in March 2025, extending coverage from primary care physicians to all physicians statewide. Maryland, effective 1 July 2025, restricts non-competes for healthcare providers earning under 350,000 dollars annually. Massachusetts has long protected physicians, nurses, and psychologists through multiple statutes dating back to the late 1970s.

The FTC's targeted enforcement focus on healthcare non-competes may accelerate state-level action. Even in states without specific healthcare restrictions, employers in the sector should anticipate increased regulatory scrutiny and consider whether their agreements would survive challenge under general reasonableness standards.

Industry-Specific Bans Beyond Healthcare

Several states have carved out additional industry-specific protections. The District of Columbia and Utah restrict non-competes for broadcast industry employees, addressing concerns about talent mobility in media markets. Hawaii prohibits non-competes for technology workers, recognizing the sector's reliance on employee mobility for innovation. Maryland has extended its restrictions to cover veterinarians and veterinary technicians.

These targeted bans suggest that even states unwilling to enact blanket prohibitions may progressively restrict non-competes in industries where the balance of power between employer and employee is seen as particularly lopsided or where public interest concerns (patient care, media diversity, technological innovation) are at stake.

Florida: A Counter-Trend

Not every state is moving toward restriction. Florida, effective 1 July 2025, strengthened employer protections by permitting non-compete agreements of up to four years for employees earning more than twice the county average annual wage. This places Florida at the employer-friendly end of the spectrum and may attract businesses that want the ability to enforce robust restrictive covenants against senior personnel.

The Florida approach underscores why a federal solution has been elusive. States disagree fundamentally on whether non-competes promote or harm economic growth. The result is that the choice of where to incorporate, where to base employees, and which state's law governs an employment agreement has material consequences for both employers and workers.

Penalties for Non-Compliance

States that restrict non-competes have introduced meaningful penalties for employers that attempt to enforce prohibited agreements. Colorado imposes fines of 5,000 dollars per affected worker. The District of Columbia applies penalties of 350 to 1,000 dollars per violation. Illinois escalates penalties from 5,000 dollars for initial violations to 10,000 dollars for repeat offences. Maine mandates a minimum penalty of 5,000 dollars. Virginia assesses 250 to 1,000 dollars per violation plus attorney fees. Washington imposes 5,000 dollars per violation and makes the employer liable for the worker's legal fees.

These penalty structures mean that an employer who applies a standard-form non-compete across a large workforce without checking state-specific rules faces potential aggregate liability in the hundreds of thousands of dollars, quite apart from the reputational damage of litigating unenforceable agreements.

Practical Recommendations

For employers, the priority is a jurisdiction-by-jurisdiction audit of existing non-compete agreements. Template agreements drafted for one state cannot be safely applied elsewhere. Where non-competes are restricted, consider whether non-solicitation agreements, confidentiality provisions, or garden leave clauses can achieve the same protective objectives within legal limits. For employees subject to a non-compete, the first step is to determine which state's law governs the agreement and whether recent legislative changes may have rendered the clause unenforceable.

Businesses with operations in Wisconsin, where LexForm maintains a US office, should note that Wisconsin law (Wis. Stat. Section 103.465) permits non-competes only if they are necessary for the protection of the employer, provide a reasonable time limitation, provide a reasonable territorial limitation, and are not harsh or oppressive to the employee. Wisconsin courts have historically reformed overbroad non-competes rather than striking them entirely, but the trend toward employee protection is unmistakable.

The absence of a federal standard means that non-compete law will continue to evolve at the state level. Employers and workers alike should monitor their jurisdictions closely and seek legal advice before entering into or seeking to enforce restrictive covenants.