Non-Compete Agreements: Which States Have the Strictest Laws

Noncompete agreements are legal tools to restrict employees from working for competitors for set periods after leaving a company. They have been around since the United States established jurisdictional common law systems in the 19th century. Traditionally, noncompete agreements or clauses have been used by American employers to protect trade secrets and confidential information. Recently, however, these tools have been facing increased scrutiny and legislative challenges as some jurisdictions move toward stricter regulations.

In Virginia, Senate Bill 170 aims to make noncompete agreements and clauses less enforceable in 2026 by protecting employees terminated without cause. This proposal aligns with the 2024 efforts of the Federal Trade Commission (FTC) to implement a nationwide ban for specific employment circumstances. With this in mind, let’s review the states where these arrangements feature heavy restrictions:

California

The Golden State has a long history of restricting noncompete agreements, and it recently upheld this approach through two bills passed by the Assembly and Senate. Established law already declares noncompete action void; nonetheless, the statutes have been amended to make it unlawful when it is a part of an employment contract. In other words, trying to sneak a noncompete clause could render the entire employment agreement invalid.

Minnesota

Like California, noncompete provisions are banned for most employees and independent contractors in the North Star State since July 1, 2023. Current law describes noncompete actions as unenforceable because of their potential to limit job market mobility. If noncompete language is added to an employment contract, employees can seek injunctive relief and attorney fees in case of prohibited or zealous enforcement. Since 2024, Minnesota has bolstered its anti-noncompete legislature with provisions covering service contracts that prevent companies from hiring employees away from service providers.

Montana

Noncompete agreements do not have firm standing in Big Sky Country because of historic laws preventing general restraints on business, employment, and trade. Over the last two years, Montana lawmakers have passed legislation that specifically prohibits noncompete action in the healthcare sector, where some corporate legal teams had managed to skirt the prohibition with non-solicitation clauses. While Montana laws allow employers to recover costs such as relocation expenses or tuition reimbursement, the corporate legal team must pay close attention when drafting the corresponding provisions to ensure compliance.

North Dakota

In the Peace Garden State, noncompete agreements are not possible because they fall under the “Unlawful and Voidable Contracts” category. There are a couple of exceptions, but they are barely permissive; for example, some noncompete provisions can be added to the dissolution of a business partnership. When North Dakota attorneys draft business and employment contracts with non-disclosure agreements, which are permitted, they carefully avoid falling into noncompete language that may put the contract at risk of being voided in court.

Oklahoma

The Sooner State has the legal distinction of largely rejecting noncompete agreements, clauses, and provisions since the 19th century. Title 15 of the Oklahoma Statutes prohibits business or employment agreements that may restrain employees from exercising lawful professions or trades. In 2024, legislators amended Title 15 to clarify differences between noncompete language and non-disclosure covenants, which are allowed to some extent. While companies are allowed to include provisions to prevent employee poaching and direct solicitation of established customers, corporate legal teams must avoid falling into noncompete situations.

Wyoming

Until 2025, noncompete agreements in the Cowboy State were allowed under a reasonable standard, and many judges sided with employers within this scope. Senate File 107 changed the legal landscape because it declares covenants not to compete void and unenforceable. While the new Wyoming law may seem restrictive, it allows exceptions when trade secrets must be protected, and also when the covered employees work as general managers or company executives.

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