Non-compete and non-solicit agreements are common in employment contracts, but small business owners often assume they're more enforceable than they actually are. Enforceability varies dramatically by state — some states like California ban most employee non-competes outright, while others enforce them if they're reasonably limited in time, geography, and scope. Signing an employee to a broad, generic non-compete doesn't automatically protect the business; if it's not written to hold up in your state, it may be worthless when you actually need it.
Understand the Difference Between Non-Compete and Non-Solicit
A non-compete restricts a former employee from working for a competitor or starting a competing business, while a non-solicit restricts them from poaching customers or other employees after they leave. Non-solicits are generally viewed more favorably by courts because they're narrower and don't prevent someone from earning a living in their field — which makes them a more reliable tool in states where broad non-competes face skepticism or outright bans.
Reasonableness Is the Legal Test in Most States
Where non-competes are enforceable, courts typically evaluate whether the restriction is reasonable in three dimensions: duration, geographic scope, and the scope of restricted activity. A one-year restriction limited to a specific metro area and a narrowly defined competing role is far more likely to hold up than an indefinite, nationwide ban on working in the industry. Overly broad agreements don't just risk being unenforced — in some states, courts will strike the entire clause rather than narrow it to something reasonable.
Consideration Matters, Especially for Existing Employees
A non-compete signed as a condition of a new job offer is generally treated as supported by valid consideration — the job itself. Asking an existing employee to sign one later, without anything additional given in exchange (a raise, a bonus, a promotion), is legally weaker in many states and can be challenged for lack of consideration. If you need existing employees to sign new restrictive covenants, pair the request with something of value.
Consider Whether a Non-Solicit Alone Solves Your Actual Risk
Before drafting a broad non-compete, think concretely about what you're actually trying to prevent. If the real risk is a departing salesperson taking your customer list to a competitor, a non-solicit covering clients and employees may fully address that risk without the added legal fragility and employee pushback that comes with a full non-compete.
Pair Restrictive Covenants With Confidentiality and IP Assignment Clauses
Non-competes and non-solicits work best as part of a broader agreement that also includes confidentiality obligations and assignment of work-related intellectual property to the company. Even where a non-compete is hard to enforce, confidentiality and trade secret protections often survive court scrutiny more reliably and can address much of the same underlying risk.
Review Agreements When You Hire in a New State
A restrictive covenant template written for one state's law may be unenforceable, or even illegal to present to an employee, in another. If your business hires remote employees or expands into new states, have your restrictive covenants reviewed against each relevant state's current law rather than assuming your existing template travels well.
Don't Rely on a Non-Compete You've Never Tested
Many small business owners have employees sign standard non-compete language without ever confirming it would actually hold up if challenged. If protecting customer relationships or trade secrets from a departing employee is a real risk for your business, it's worth having an employment attorney review your specific agreements against current state law, rather than discovering the gaps only after someone has already left and taken clients with them.
Restrictive covenants are a useful tool, but only when they're narrowly tailored to a real risk and written to match the law of the state where your employee actually works. A broad, boilerplate non-compete can create a false sense of protection while doing very little if it's ever actually tested.
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