Are Non-Competes Enforceable in 2026? A State-by-State Reality Check

Where the federal ban went

A great deal of confusion persists here, so it is worth stating the sequence plainly.

In April 2024 the Federal Trade Commission issued a rule that would have banned most non-compete clauses nationwide and required employers to notify workers that existing covenants were unenforceable. Before its effective date, a federal district court set the rule aside on a nationwide basis. It never applied to any employer or any worker. The Commission appealed, then withdrew the appeal in September 2025, and in February 2026 formally removed the rule from the Code of Federal Regulations.

What replaced it is narrower but not nothing. The agency has said it will scrutinize non-competes case by case under its existing competition authority, and it has acted — an enforcement action against a pet cremation company over its restrictive covenants, and warning letters to healthcare and staffing employers. That is a meaningful signal for employers using aggressive covenants at scale in low-wage industries. It is not a rule anyone can rely on as a defense to a non-compete in their own contract.

The practical takeaway: if someone tells you your non-compete is void because "the FTC banned them," they are wrong. Look at your state.

The four state models

Every U.S. jurisdiction now falls into roughly one of four categories. Identifying which one applies to you answers most of the question before you read a single word of the clause.

What changed between May and July 2026

Four states moved in a single quarter, which is a fair indication of the direction of travel.

• Tennessee — H.B. 1034, signed May 7, 2026 and effective July 1, 2026, introduced a compensation threshold and a set of rebuttable statutory presumptions governing restrictive covenants, along with a specific framework for emergency medicine physicians.
• Virginia — already the strictest of the threshold states after its July 1, 2025 expansion barring non-competes for every FLSA overtime-eligible employee regardless of income. Effective July 1, 2026, S.B. 128 added restrictions covering healthcare workers and S.B. 170 made covenants unenforceable against employees discharged without severance.
• Washington — HB 1155 renders non-competes unenforceable on or after June 30, 2027, and the prohibition applies retroactively. Existing income thresholds and an 18-month duration cap govern until then.
• Utah — H.B. 203 was introduced in 2026 and would restrict covenants for non-exempt workers, students, minors, employees earning under $155,000 and workers terminated in a reduction in force. It is proposed, not enacted; Utah's existing one-year maximum and its restrictions on broadcast and healthcare-platform employees continue to apply.

Note the pattern in Virginia and Utah. The newest wave is not just about salary — it targets involuntary separation. A covenant that binds someone the employer chose to let go is getting hard to defend, and legislatures are writing that instinct into statute.

The multi-state problem

If you employ or engage people in more than one state, the covenant that was a single clause with one carve-out a decade ago is now a conditional spanning close to twenty jurisdictions. Two consequences.

First, choice-of-law clauses do not fix it. Courts generally apply the law of the state with the most significant relationship to the employment, and several states have gone further by statute: they void covenants for workers who reside or primarily work there regardless of what the contract says. California is the extreme case — it voids the covenant, makes it unlawful to include one in an employment agreement, requires notice to affected current and former employees, and gives the worker a right of action against the employer.

Second, an unenforceable covenant is not harmless. In several jurisdictions it is an independent violation with its own remedies, and in a dispute it colors everything else. If your template contains a covenant that is void where the employee sits, you are not "leaving it in just in case" — you may be creating the claim.

The workable approach for a multi-state employer is a state-conditioned schedule: one agreement, with an appendix that sets the applicable restriction, duration and threshold by jurisdiction, and omits the covenant entirely where it is void.

What to use instead

Most of the time, the non-compete is not what the business actually needs. It needs three narrower things, all of which are more enforceable and less legally fraught.

Our guides to NDAs and confidentiality agreements and essential contract clauses cover how to draft the first two properly.

If you have been asked to sign one

1. Find your state's rule first. Everything else is secondary. If you work in a ban state, or below your state's wage threshold, the clause may already be void.
2. Read the scope, not the duration. "Twelve months" sounds modest until you notice the definition of competing business covers the entire industry with no geographic limit. Scope is where these are unreasonable.
3. Ask what happens on involuntary termination. The fairest and increasingly common answer is that the covenant lapses if the employer ends the relationship without cause. Ask for it in writing.
4. Ask what is actually being protected. If the answer is client relationships or confidential information, propose a non-solicit and a strong NDA instead. That trade is accepted more often than people expect.
5. Negotiate consideration. Some states require independent consideration beyond continued employment. Where they do not, a paid notice or garden-leave period is still a reasonable ask for a genuine restraint on your ability to earn.

The freelancer angle

Non-competes in independent contractor agreements deserve their own warning. They cut against the entire structure of the relationship: an independent contractor is supposed to serve multiple clients and control their own business. A covenant restricting that is evidence pointing toward employee status under every classification test that matters — see our 2026 classification guide.

So a client asking a freelancer for a non-compete is buying two problems: a restriction that is likely unenforceable in a growing number of states, and a fact that helps a regulator or a court conclude the contractor was really an employee. Confidentiality plus a narrow non-solicit of the client's own customers gets nearly all of the legitimate protection with neither problem.

The short version

No federal ban, no imminent federal ban, and no shortcut around your own state's rule. Find your state's model — outright ban, timer, wage threshold or reasonableness — then read the scope rather than the duration. If you are the one drafting, ask what you are actually protecting; the honest answer is usually confidentiality and client relationships, and both have better instruments than a non-compete.

This article is general information about how contracts commonly work, not legal advice, and reading it does not create an attorney-client relationship. Laws differ by jurisdiction and change over time. Consult a licensed attorney in your jurisdiction before relying on any agreement.