Are Non-Competes Enforceable in 2026? State Law Updates (US)

What is the basic structure of employment and labor law in the United States?

US employment and labor law combines federal laws that set minimum standards with state and local laws that add stronger or more detailed protections. Most employees work "at will," but contracts, statutes, and collective bargaining agreements can limit termination rights and govern post-employment restrictions like non-competes.

To design or review 2026 employment contracts, you need to understand three layers: federal laws that apply nationwide, state statutes and case law that vary sharply, and any written contracts or policies you adopt. Here is the core framework.

Federal baseline laws to know

• Wage and hour: Fair Labor Standards Act (FLSA) covers minimum wage, overtime, and exempt vs non-exempt classification.
• Discrimination and harassment:
  • Title VII of the Civil Rights Act - race, color, religion, sex, national origin.
  • Americans with Disabilities Act (ADA) - disability, reasonable accommodation.
  • Age Discrimination in Employment Act (ADEA) - age 40+.
  • Pregnancy Discrimination Act (part of Title VII) and the Pregnant Workers Fairness Act.
• Leave and benefits: Family and Medical Leave Act (FMLA) for unpaid job-protected leave, COBRA for continuation of group health coverage.
• Collective activity and unions: National Labor Relations Act (NLRA) protects union organizing and many forms of concerted activity, even in non-union workplaces.
• Worker classification and benefits: ERISA for retirement and health plans, federal tax rules for employee vs contractor classification.

Key federal agencies

• US Department of Labor (DOL): wage and hour, FMLA, some benefits issues.
• Equal Employment Opportunity Commission (EEOC): discrimination, harassment, retaliation.
• National Labor Relations Board (NLRB): union and non-union concerted activity, unfair labor practices.

Why state law dominates many contract issues

• Non-competes and restrictive covenants: almost entirely creatures of state law, with wide variation on enforceability.
• State wage and hour: many states and cities set higher minimum wages and stricter overtime rules than the FLSA.
• State leave laws: paid family and medical leave in states like California, New York, Washington, Massachusetts, Oregon, and others.
• Public policy limits on at-will employment: wrongful discharge, lawful off-duty conduct, and whistleblower protections vary by state.

How do non-compete agreements work in the US now that the FTC rule is stalled?

With the FTC's nationwide non-compete ban stalled or vacated, there is currently no single federal rule on non-competes. Enforceability is now decided almost entirely by state statutes and courts, which creates a patchwork where the same clause can be invalid in one state but enforceable in another.

Most states that still permit non-competes require them to be narrowly tailored to legitimate business interests, limited in time and geography, supported by adequate consideration, and not harmful to the public. At the same time, a growing group of states largely bans non-competes, especially for employees who are not owners or senior executives.

States that broadly ban employee non-competes

• California: Business and Professions Code section 16600 generally voids employee non-competes; recent laws also ban requiring out-of-state employees who live and work in California to agree to non-competes.
• Minnesota: As of 2023, nearly all employment non-competes are void, except in connection with sale of a business or dissolution of a partnership/LLC.
• Oklahoma and North Dakota: longstanding statutory bans on employee non-compete covenants, with limited sale-of-business exceptions.
• District of Columbia: ban on most non-competes for employees who primarily work in DC, with narrow exceptions.

States that allow but restrict non-competes

Many states still allow non-competes but impose:

• Salary thresholds (blocking non-competes for low and moderate wage workers).
• Advance written notice at the time of offer or before acceptance.
• Duration limits, often 12 to 24 months.
• Special rules for mid-employment covenants, such as requiring extra consideration.

Examples include Washington, Oregon, Colorado, Illinois, Massachusetts, Virginia, and others. The details matter, especially for 2026 contracts, because salary thresholds and definition of "low wage" workers change annually and differ state by state.

Why can a non-compete be valid in Texas but void in California or Minnesota?

A non-compete can be valid in Texas but void in California or Minnesota because each state has its own statutes and public policy about restraints on trade. Some states treat non-competes as presumptively enforceable if reasonable, while others treat almost all employee non-competes as void regardless of how they are drafted.

The same form agreement used nationwide will not work in this environment. You must either localize non-compete terms by state or adopt a national strategy that relies on less restrictive covenants that are more widely enforceable.

Illustrative comparison of state approaches

Typical validity in Texas vs void in California/Minnesota

• Texas:
  • Courts frequently enforce 6 to 24 month non-competes that are tied to protecting trade secrets, customer relationships, or specialized training.
  • Courts can "reform" overly broad restrictions to make them reasonable rather than voiding them entirely.
• California and Minnesota:
  • Non-competes in standard employment agreements are typically void on their face, so courts will not rewrite them to save the clause.
  • Employers must rely instead on non-solicitation (to the extent allowed), confidentiality agreements, and trade secret law.

For multistate employers in 2026, this makes a nationally uniform non-compete form risky. A safe strategy is to build a baseline of confidentiality and non-solicitation that works everywhere, then layer in state-specific non-competes only where they are allowed and necessary.

What salary thresholds apply to non-competes in 2026 in states like Washington and Oregon?

In 2026, salary thresholds for non-compete enforceability in states like Washington and Oregon will continue to function as income "floors" that block non-competes for lower-earning workers. The exact dollar amounts change annually, so you must check each state's published thresholds for the year the contract is signed and enforced.

These thresholds are a core part of a 2026 compliance strategy, because a non-compete that violates a threshold is usually void in that state regardless of how reasonable its scope or duration might be. Here is how the main Western "threshold" states work as of the latest available data.

Washington (RCW 49.62)

• Income floor: Employee non-competes are enforceable only if the worker's annualized earnings exceed a statutory amount that is adjusted each year for inflation.
• Reference numbers: For 2024, the DOL set the threshold at about $120,560 for employees and about $301,400 for independent contractors. The 2026 thresholds will be higher because they are indexed.
• Practical rule for 2026 contracts:
  • Before using a non-compete, check the current year's figures on the Washington State Department of Labor & Industries site.
  • Build internal systems to flag offers below the threshold so your template automatically swaps in a non-solicit instead of a non-compete.

Oregon (ORS 653.295)

• Income floor: Non-competes apply only if the employee's annual gross salary and commissions exceed a threshold tied to the median family income for a family of four, as published by the US Census Bureau and updated annually.
• Reference point: That threshold has been well into six figures and will remain so; in practice, lower and many mid-level employees cannot be bound by a non-compete in Oregon by 2026.
• Other key limits:
  • Non-compete duration is capped at 12 months post-employment.
  • Employers must provide written notice of the non-compete at least 14 days before the first day of employment or as part of a bona fide advancement.

Other common income-threshold states (as of latest data)

Practical steps for 2026 salary-threshold compliance

1. Build a state-by-state threshold matrix: Maintain an internal chart showing the current year's income thresholds for every state you operate in, updated annually every January.
2. Connect thresholds to your HRIS/ATS: Configure your HR or applicant tracking system to tag roles below each state's threshold and automatically remove or substitute non-compete language.
3. Document annual reviews: Each year, record when and how you updated thresholds so you can prove good-faith compliance if challenged.
4. Train recruiters and managers: Ensure decision-makers understand that in states like Washington and Oregon, you simply cannot bind lower-paid employees to non-competes, even if the employee is willing to sign.

What is "garden leave" and how does it affect non-compete enforceability?

Garden leave is a period during which an employee is paid (often fully or partially) while they are not actively working but remain employed or subject to non-compete restrictions. In the US, garden leave is increasingly used to make non-competes more enforceable and fair, and in some states like Massachusetts it is effectively required for post-employment non-competes.

For 2026 contracts, garden leave is becoming a key design tool: employers use it to soften the impact of non-competes, respond to judicial and legislative skepticism, and maintain control over strategic departures while reducing litigation risk.

How garden leave typically works

• Active employment garden leave: The employee remains on payroll, cannot work elsewhere, may be relieved of duties, and may be required to be available for transition assistance.
• Post-employment paid non-compete: The employment ends, but the employer pays the employee a percentage of their base salary (or a flat amount) for some or all of the restricted period.
• Scope alignment: The paid period usually matches the non-compete duration, often 3 to 12 months for US executives.

Massachusetts example (formal garden leave requirement)

Under the Massachusetts Noncompetition Agreement Act:

• Post-employment non-competes must include either:
  • "Garden leave" pay of at least 50 percent of the employee's highest base salary during the last two years, or
  • Some other "mutually agreed upon consideration" specified in the agreement.
• The agreement must be provided at least 10 business days before the start date and must inform the employee of their right to consult counsel.
• Non-competes are prohibited for non-exempt workers and certain student or short-term employees.

Why garden leave is spreading beyond Massachusetts

• Court perception of fairness: Judges are more willing to enforce restrictions when the employee receives real financial support during the non-compete period.
• Legislative trend: Several states are moving toward or considering models that either mandate or favor paid non-compete periods, especially for mid-level employees.
• Retention and transition: Garden leave gives employers time to protect relationships and information, transition accounts, and demote the competitive threat, especially in finance, tech, and high-level sales.

Designing garden leave in 2026 contracts

1. Decide when to use it: Reserve garden leave for higher-risk roles (C-suite, key sales, senior engineers) where the cost is justified by risk reduction.
2. Choose the payment model:
   • Percentage of base pay (for example, 50 to 100 percent).
   • Flat monthly stipend for the restricted period.
   • Bonus-based formula if base salary is low but variable comp is high.
3. Align with state law: In states like Massachusetts, make sure the structure matches statutory garden leave rules; in others, use it to support reasonableness and consideration.
4. Address duties and cooperation: Specify whether the employee must be available for calls, handovers, or consulting during garden leave, and ensure this is consistent with wage and hour rules.

What alternatives to non-competes can US employers use to protect their business?

Alternatives to non-competes include non-solicitation, confidentiality, invention assignment agreements, and robust trade secret practices. These tools are enforceable in more states than non-competes and are essential for 2026 employment agreements, especially where non-competes are banned or heavily restricted.

A strong contract strategy uses these alternatives as the default, then adds non-competes only where clearly allowed, necessary, and supported by pay and notice. This reduces legal risk while still protecting core assets.

Non-solicitation covenants

• Customer non-solicitation: Prohibits the departing employee from soliciting or doing business with customers or prospects they worked with during a defined lookback period.
• Employee non-solicitation / no-poach: Prohibits the departing employee from recruiting co-workers to a competitor for a limited period.
• State variation: Some non-compete ban states are also tightening rules on non-solicits, especially no-poach clauses, so you must track local law and any antitrust concerns.

Confidentiality and trade secret protection

• Nondisclosure agreements (NDAs): Protect confidential business information, know-how, and strategy from disclosure or misuse.
• Trade Secret Acts:
  • Federal Defend Trade Secrets Act (DTSA) and state Uniform Trade Secrets Acts create powerful remedies if you can show you reasonably protected your secrets.
• Operational safeguards: Access controls, clean device returns, exit interviews, and prompt deactivation of accounts are just as important as paper agreements.

Invention assignment and IP ownership

• Invention assignment clauses: Ensure the employer owns patents, code, and inventions created within the scope of employment.
• State carve-outs: Some states (including California) require specific clauses preserving employee ownership of inventions created entirely on their own time without company resources.

Non-disparagement and confidentiality of settlements

• Limited use: Narrowly tailored non-disparagement clauses can protect reputation but must comply with federal and state limitations, especially around whistleblowing and harassment disclosures.
• Silenced No More laws: Several states limit how far employers can go in gagging employees about discrimination, harassment, or labor violations, even in settlements.

What other core US employment rules should employers keep in mind when drafting 2026 contracts?

Beyond non-competes, 2026 employment contracts must align with federal wage and hour rules, anti-discrimination laws, leave laws, worker classification standards, and union/collective activity protections. Many of these areas also feature state-specific add-ons that are just as strict as non-compete rules.

Aligning your contracts to these rules reduces litigation risk and improves your position if disputes arise. Here are the main areas to integrate into your 2026 contract templates and policies.

Wage and hour compliance

• FLSA exemptions: Only properly classified exempt employees can be salaried without overtime; your offer letters should reflect exemption status and job duties that match the exemption tests.
• State overtime laws: Some states, like California, impose daily overtime and tougher exemption tests, especially for inside sales and managers.
• Wage statement and timing rules: Many states require detailed pay stubs and set specific pay frequency and final paycheck deadlines.

Anti-discrimination, harassment, and retaliation

• Equal opportunity language: Contracts should avoid any term that negates statutory protections or shortens federal discrimination claim deadlines below what courts allow.
• Arbitration and class waivers: The law is evolving, but many employers still use arbitration agreements; some states restrict mandatory arbitration for certain claims, and the federal Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act limits forced arbitration in those areas.
• Anti-retaliation: You cannot punish employees for asserting rights related to pay, safety, discrimination, or protected concerted activity.

Leave and accommodation

• FMLA eligibility: Contracts should not contradict statutorily available leave; handbooks are often a better tool for describing leave than offer letters.
• State paid leave programs: States like California, New York, Washington, Massachusetts, Oregon, New Jersey and others have paid family and medical leave or paid sick time rules that must align with your PTO policies.
• Disability and pregnancy accommodations: ADA and the Pregnant Workers Fairness Act require an individualized interactive process; rigid contract terms on attendance or schedules can clash with these obligations.

Worker classification and independent contractors

• Employee vs contractor: Federal and state tests differ; some states use strict "ABC" tests for wage and hour and unemployment insurance.
• Contractor agreements: For true contractors, use separate agreements that avoid control-heavy language typical of employment contracts.

Union and collective activity

• NLRA rights: Even without a union, employees have the right to discuss wages and working conditions; overbroad confidentiality or social media policies can violate these rights.
• Mandatory meetings and waivers: Recent NLRB decisions scrutinize employer rules that chill organizing or group complaints.

When should you hire a lawyer or expert for US employment and labor issues?

You should hire a US employment lawyer or expert whenever you operate in multiple states, use non-competes or sophisticated equity plans, or face high-risk terminations, investigations, or wage and hour audits. The cost of tailored legal advice is usually far lower than the cost of defending a misstep under rapidly changing state and federal rules.

In 2026, the patchwork of non-compete laws, salary thresholds, garden leave expectations, and state leave and wage laws makes "do it yourself" contract drafting especially risky for growth companies and employers with remote or hybrid workforces.

Common situations where expert help pays off

• Designing multistate templates: Building offer, confidentiality, incentive, and restrictive covenant templates that adapt by state.
• Revising contracts for 2026 thresholds: Updating non-competes and non-solicits to comply with new income thresholds and notice rules in Washington, Oregon, Colorado, Illinois, DC, and others.
• Handling key departures: Planning garden leave, severance, releases, and communications when executives or high-risk employees leave for competitors.
• Responding to agency charges: Answering EEOC, DOL, or NLRB complaints or state agency investigations.
• Auditing contractor models: Reviewing gig workers, consultants, and 1099 arrangements under federal and state classification tests.

Typical cost ranges (rough, US dollars)

What are the next steps for employers drafting 2026 employment contracts in the US?

For 2026, employers should move away from generic nationwide non-compete templates and toward state-sensitive, salary-aware agreements that prioritize confidentiality, non-solicitation, and strategic use of garden leave. The best next steps combine legal review with operational changes in HR and recruiting.

Actionable checklist for 2026

1. Map your workforce: List where your employees physically work, including remote and hybrid workers, and identify applicable states for each role.
2. Build a restrictive covenant matrix:
   • For each state, note whether non-competes are banned, allowed with thresholds, or allowed but disfavored.
   • Include salary thresholds, duration caps, and notice requirements (for example, Oregon's 14-day notice, Massachusetts's 10 business days and counsel notice, Washington's at-offer requirement).
3. Segment your roles:
   • High risk (C-suite, key product, major revenue drivers).
   • Moderate risk (managers, core engineers, sales).
   • Low risk (entry level, support, roles below thresholds).
   Match each segment to appropriate protections (non-compete plus garden leave, non-solicit only, or NDA only).
4. Redraft contract templates:
   • Create a national baseline offer and NDA template.
   • Add state-specific riders for restrictive covenants, leave, arbitration, and other local rules.
   • Remove or neutralize non-compete terms for states that ban them.
5. Implement salary-threshold controls:
   • Automate checks in your offer process so that non-competes are only included where the projected earnings exceed state thresholds.
   • Schedule annual reviews each January to update thresholds and templates.
6. Decide your garden leave policy:
   • Choose when and how you will pay during restriction periods.
   • Align internal budgeting and approval processes so that garden leave is realistic to implement.
7. Train HR, recruiters, and managers:
   • Explain the patchwork problem and why non-compete use is now more limited.
   • Provide scripts and checklists so they give timely, accurate notice and avoid off-the-cuff promises that conflict with written contracts.
8. Schedule periodic legal reviews:
   • At least annually, or whenever you expand into a new state, have counsel review your templates and policies for new statutes and case law.

By treating 2026 as a reset moment and building a thoughtful, state-specific employment contract system, you can reduce legal risk, respect evolving worker protections, and still protect your most valuable information, relationships, and talent investments.