Noncompete Agreements in 2026: The Federal and State Landscape

The federal picture

The FTC rule is not enforceable, and there is no comprehensive federal ban. The agency has instead signaled interest in case-by-case enforcement against specific employers and in scrutinizing particularly aggressive restrictive covenant practices. Multistate employers should therefore plan around state law, not a single federal standard.

California's rules are the strictest in the country

• Business and Professions Code section 16600 voids noncompetes regardless of where or when the contract was signed.
• Section 16600.1 makes it unlawful to include a void noncompete in a contract or to attempt to enforce one against a California employee, with a private right of action and attorneys' fees.
• Customer non-solicitation provisions are frequently unenforceable as de facto restraints on trade.
• Trade secret protection under CUTSA remains fully available and is the legitimate tool for protecting confidential information.
• Narrow statutory exceptions survive around the sale of a business and dissolution of a partnership or LLC interest.

What multistate employers should do

• Map your workforce by work location, not by headquarters, and apply the strictest applicable rule to each group.
• Stop using a single national template; choice-of-law clauses will not rescue a noncompete applied to a California employee.
• Replace competition restrictions with enforceable protections: confidentiality agreements, invention assignment, garden leave where permitted, and deferred compensation forfeiture reviewed against local law.
• Tighten trade secret hygiene — access controls, exit interviews, device returns, and documented onboarding of new hires from competitors.
• Watch the state legislatures: several states now impose salary thresholds, notice requirements, and industry-specific bans.

For executives and departing employees

A noncompete in an executive package is not the end of a negotiation, and in California it is likely unenforceable. But the accompanying terms — nonsolicitation, confidentiality, forfeiture-for-competition provisions in equity plans, and choice of forum clauses — can create real friction, and those are the terms worth spending negotiating capital on before signing.