Recent Developments in US Noncompete Law
Introduction
With the Federal Trade Commission abandoning its efforts to implement a noncompete rule at the federal level, noncompete law in the United States continues to be governed by individual state laws. It is crucial for employers to remain aware of ongoing developments in this area, as each state’s approach to noncompetes can and does vary widely. Several states ban noncompete agreements, altogether or in specific circumstances, and dozens more restrict their use in various ways. This article highlights several recent state-level developments in noncompete law.
California
California has long maintained one of the nation’s most restrictive public policies against noncompete agreements, rooted in Business and Professions Code Section 16600’s declaration that contracts restraining anyone from engaging in a lawful profession, trade, or business are void, with very limited exceptions. In recent years, the Legislature has enacted legislation to strengthen that policy—most recently through Assembly Bill 692 (AB 692). Effective January 1, 2026 AB 692 extends California’s anti-noncompete framework further, targeting “stay-or-pay” provisions—a category of contractual provisions the Legislature views as achieving the same restrictive effect through financial deterrence, rather than express non-compete clauses.
Specifically, AB 692 prohibits employers from including or requiring a worker to execute as a “condition of employment or a work relationship,” a contract containing a term that: (i) requires an employee or prospective employee to pay an employer, training provider, or debt collector a “debt” if the employment or a work relationship ends; (ii) permits the initiation or resumption of debt collection, or the termination of debt forbearance, upon separation from a specific employer; or (iii) imposes penalties, fees, or costs upon termination from a specific employer. These provisions apply to employment contracts entered into on or after January 1, 2026.
The statute carves out certain repayment arrangements that the Legislature determined do not function as de facto noncompetes, including government loan repayment assistance or forgiveness programs, tuition-repayment agreements that satisfy specified conditions, apprenticeship program enrollment contracts, and contracts for the lease, financing, or purchase of residential property. It also exempts discretionary signing bonus clawbacks that meet prescribed notice, proration, and repayment-upon-termination-for-misconduct conditions.
AB 692 creates a private right of action that allows workers or their representatives to bring claims on behalf of the affected worker, similarly situated individuals, or both. Affected workers may recover a minimum of $5,000 as well as injunctive relief and attorney’s fees and costs.
Colorado
Under Colorado law (Colo. Rev. Stat. § 8-2-113), a covenant not to compete that restricts an individual’s right to receive compensation for the performance of labor is void as a matter of law, subject to limited exceptions. The statute permits noncompete agreements for highly compensated workers—those earning at or above the threshold amount set by the Division of Labor Standards and Statistics—when the covenant is for the protection of trade secrets and is no broader than reasonably necessary. It similarly allows customer nonsolicitation covenants for workers earning at least sixty percent of that threshold, again limited to trade secret protection. The statute also carves out covenants entered into in connection with the purchase or sale of a business or a direct or indirect ownership share in a business, as well as certain training-expense repayment agreements and apprenticeship scholarship repayment provisions. Notably, noncompete and nonsolicitation covenants that restrict the practice of medicine, advanced practice registered nursing, or dentistry are not eligible for any of the compensation-based exceptions and are void regardless of income.
Colorado Senate Bill 25-083 (SB 25-083), effective August 6, 2025, amended Colo. Rev. Stat. § 8-2-113 to narrow the purchase-or-sale-of-a-business exception. Under the amendment, individuals who hold a minority-ownership stake acquired through equity compensation or services rendered are now subject to a durational cap on any accompanying noncompete. The maximum permissible term of the noncompete agreement is calculated by dividing the total sale consideration by the individuals’ average annualized compensation. The amendment applies to restrictive covenants entered into or renewed on or after the effective date.
SB 25-083 also expands protections for healthcare providers. The amendment eliminates the statute’s former standalone provision addressing physicians, replacing it with a broader rule that voids any noncompete or patient-related non-solicitation covenant that limits the practice of medicine, advanced-practice registered nursing, or dentistry, regardless of the provider’s income or whether the covenant is asserted to protect trade secrets. The amendment further renders unenforceable any liquidated damages provision tied to the termination of a healthcare provider’s employment agreement, or which conditions the right to compete on a financial payment.
In addition, the amendment broadens the communications healthcare providers may have with patients upon leaving an employer. Employers may no longer prohibit a departing provider from notifying patients of the departure and sharing new contact information. Before the amendment, only providers treating patients with rare disorders could communicate about their continued practice of medicine and updated professional contact information.
Since the amendment went into effect in August 2025, no Colorado court has published a decision construing SB 25-083.
Florida
Florida’s Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth (CHOICE) Act took effect on July 1, 2025, further cementing Florida’s status as one of the most employer-friendly jurisdictions for noncompete agreements. The CHOICE Act permits employers to enter into certain noncompete and garden-leave agreements with covered employees or independent contractors. An employee or independent contractor is covered under the CHOICE Act if they earn a base salary greater than twice the annual mean wage for the county in Florida in which the employer has its principal place of business. If the employer’s principal place of business is not in Florida, then the Florida county where the employee resides will determine the applicable salary threshold. The salary calculation specifically excludes health care benefits, severance pay, retirement benefits, discretionary incentive compensation, tips, bonuses, and commissions. Notably, health care practitioners are excluded from the definition of “covered employee” under the Act. Further, the CHOICE Act applies only where either (i) the covered employee maintains a primary place of work in Florida, or (ii) the employer has its primary place of business in Florida and the noncompete agreement is expressly governed by Florida law.
Under the CHOICE Act, employers and employees may enter into noncompete agreements or “garden-leave agreements”—agreements in which the employer agrees to continue paying the covered employee the same salary and providing the same benefits throughout the notice period, during which the covered employee agrees not to resign or work for another employee without the employer’s consent. The duration of both noncompete and garden leave agreements may be as long as four years.
For a noncompete or garden leave agreement to be enforceable under the CHOICE Act, employers must satisfy specific requirements, including: (i) advising the covered employee, in writing, of the right to seek counsel before execution of the agreement; (ii) providing the proposed agreement to a prospective covered employee at least seven days before an offer of employment expires, or to a current covered employee at least seven days before the offer to enter into the agreement expires; and (iii) obtaining a written acknowledgment from the covered employee that he or she will receive confidential information or customer relationships in the course of employment. For agreements that satisfy those requirements, the CHOICE Act creates a presumption of enforceability and places the burden on the employee to show why the agreement should not be enforced. Agreements entered into before the Act’s July 1, 2025 effective date, however, are not covered by the Act.
Since enactment of the CHOICE Act, no Florida court has published a decision construing the statute.
Tennessee
On May 7, 2026, Tennessee Governor Bill Lee signed House Bill 1034 (H.B. 1034), which took effect on July 1, 2026. Under HB 1034, employers are prohibited from requiring, requesting, or enforcing noncompete agreements against employees earning less than $70,000 in annualized compensation, including wages, salary, commission, non-discretionary bonuses, and other forms of remuneration. Noncompete agreements that violate this threshold are void and unenforceable as a matter of public policy.
The statute also establishes rebuttable presumptions governing the reasonableness of the duration of restrictive covenants. For employment and independent contractor relationships not tied to a business or ownership sale, a restrictive covenant of two years or less, measured from the date the relationship terminates, is presumed reasonable. Restrictive covenants enforced against a current or former distributor, dealer, franchise, and similar business relationships are presumed to be reasonable in time if they cover a period of three years or less, measured from the date of termination of the business relationship. For covenants tied to the sale of a business or equity interest, reasonableness is presumed if the covenant’s duration is five years or the period in which payments are made to the seller, whichever is longer. Conversely, a time restraint exceeding the applicable threshold for each respective category is presumed to be unreasonable. The statute expressly provides courts with the discretion to modify overbroad restrictive covenants to render them reasonable and enforceable.
The statute does not prohibit otherwise enforceable confidentiality and non-solicitation covenants.
Virginia
Virginia's primary noncompete statute, Va. Code Ann. § 40.1-28.7:8—titled “Covenants not to compete prohibited; exceptions; civil penalty”—regulates employment-related covenants not to compete, including categorical prohibitions for low-wage employees and health care professionals, as well as limits on enforcement against discharged employees. The statute defines a “covenant not to compete” as any covenant or agreement, including a provision of a contract of employment, that restrains, prohibits, or otherwise restricts an individual’s ability, following termination, to compete with a former employer.
Effective July 1, 2026, Virginia’s Senate Bill 170 adds a new provision addressing employees who are discharged without cause. Under the amendment, a noncompete is unenforceable against an employee who is discharged by the employer without cause unless the employer provides severance benefits or another monetary payment. The statute requires that the severance benefits or other monetary payment be disclosed to the employee at the time the covenant not to compete is executed. Notably, the statute does not define “cause” and does not establish a minimum payment amount. The new provisions apply to contracts entered into, amended, or renewed on or after July 1, 2026.
Virginia also continues to prohibit employers from entering into, enforcing, or threatening to enforce noncompetes with “low-wage employees.” A “low-wage employee” is defined as one whose average weekly earnings are less than Virginia’s average weekly wage or—since July 1, 2025—who are entitled to overtime under the Fair Labor Standards Act. The prohibition does not cover employees whose earnings are derived, in whole or in predominant part, from sales commissions, incentives, or bonuses.
Washington
Washington has regulated noncompete agreements through chapter 49.62 RCW since 2020. Under the current framework—in effect through June 29, 2027—RCW 49.62.020 renders an employee noncompete void and unenforceable unless, among other conditions, the individual’s annualized earnings exceed a specified threshold. The current law also requires written disclosure of the covenant’s terms at the time of the employee’s initial acceptance of employment, creates a rebuttable presumption that any covenant exceeding eighteen months is unreasonable, and conditions enforcement of a laid-off employee’s noncompete on the employer providing compensation equivalent to the employee's base salary for the enforcement period.
In March 2026, Washington State enacted Engrossed Substitute House Bill 1155, which will overhaul this framework when it takes effect on June 30, 2027. The new law will significantly expand Washington’s current noncompete restrictions by rendering all noncompete covenants void and unenforceable, irrespective of income level or the date on which the agreement was entered. The law will apply retroactively, and the core provisions apply to all proceedings commenced on or after the effective date, regardless of when the cause of action arose.
The law prohibits employers from enforcing, attempting to enforce, or threatening to enforce any noncompete covenant against an employee, as well as from representing that an employee is subject to a noncompete or entering into a new noncompete. A violation entitles the aggrieved party to the greater of the actual damages or a statutory penalty of $5,000, plus reasonable attorneys’ fees, expenses, and costs.
By October 1, 2027, Washington employers are required to make reasonable efforts to provide written notice to all current and former workers and independent contractors whose noncompetes are void and unenforceable.
The new law preserves several carve-outs from the definition of “noncompetition covenant” for nonsolicitation agreements, confidentiality agreements, covenants prohibiting the use or disclosure of trade secrets or inventions, and qualifying written agreements to repay out-of-pocket educational expenses. The statute also continues to exclude covenants entered into by a person purchasing or selling the goodwill of a business or otherwise acquiring or disposing of an ownership interest—but only if the person signing the covenant acquires or disposes of an ownership interest representing one percent or more of the business.
Wyoming
In March 2025, Wyoming enacted Enrolled Act No. 87, Wyo. Stat. § 1-23-108, which renders void any covenant not to compete that restricts the right of any person to receive compensation for the performance of skilled or unskilled labor. The law applies to contracts entered into on or after July 1, 2025, and does not apply retroactively to existing agreements.
The statute provides several important exceptions. Noncompete covenants remain permissible: (1) when contained in a contract for the purchase and sale of a business or its assets; (2) to the extent it provides for the protection of trade secrets as defined by Wyo. Stat. § 6‑3‑501(a)(xi); (3) when a contractual provision provides for the recovery of all or a portion of the expenses of relocating, educating, and training an employee—subject to declining-balance caps if they leave within specified periods of time; and (4) when the covenant applies to executive and management personnel, and officers and employees who constitute professional staff to executive and management personnel. Notably, the statute does not define the terms “executive and management personnel” or “professional staff,” Leaving employers to determine which roles fall within this exception.
To date, no Wyoming court has published a decision construing Enrolled Act No. 87.
Conclusion
While noncompete agreements remain enforceable in many jurisdictions if they are reasonable in scope and supported by legitimate business interests, the legislative trend toward increased limitations on noncompetes at the state level continues to grow. States are moving to restrict or eliminate these covenants. In the past two years alone, several states have imposed new compensation thresholds, durational presumptions, categorical bans for certain worker populations, and outright prohibitions.
For employers operating across multiple jurisdictions, the compliance landscape has grown significantly more complex. Compensation thresholds, notice requirements, exemption categories, and other nuances vary widely from state to state—and in some cases, recent amendments apply retroactively to existing agreements. Multi-state employers should audit their current noncompete agreements and policies to ensure compliance with the applicable law in each jurisdiction where they have employees, and should work closely with employment counsel to navigate the evolving patchwork of state restrictions.
