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Non-Compete & Non-Solicit Agreements After the New Rules: What Still Works, What Doesn’t

ByLDS Legal Journal Team

The FTC’s nationwide non-compete ban never took effect—struck down in federal court and later abandoned on appeal—while states like California and Minnesota now prohibit most employment non-competes outright and others (Washington, Colorado) impose high income thresholds and strict tailoring. This playbook separates what still works (confidentiality, trade secrets, narrowly tailored non-solicits in many states, garden-leave variants, sale-of-business covenants) from what doesn’t—and flags the new antitrust and NLRA landmines.

Title: Non-Compete & Non-Solicit Agreements After the New Rules: What Still Works, What Doesn’t
Author: LDS Legal Journal Team
Est Read: 12 minutes

The 2025 reality in one paragraph

The FTC’s 2024 final rule that would have banned most non-competes nationwide was set aside by a federal court in Texas with nationwide effect and did not take effect on September 4, 2024. In September 2025, the FTC moved to dismiss its appeals and accede to vacatur—leaving non-compete law to the states and traditional doctrines. Pillsbury Law+2The Verge+2

Federal overlays you can’t ignore

Antitrust (no-poach / wage-fixing).
Regardless of state non-compete rules, agreements among employers not to hire or solicit each other’s workers—or to fix wages—remain antitrust hazards. DOJ and FTC issued updated 2025 guidance warning that naked no-poach and wage-fixing agreements may draw criminal enforcement; the guidance replaces the 2016 HR memo but keeps the same core message. ftc.gov+2McGuireWoods+2

NLRA (union/organizing rights).
The NLRB’s General Counsel has argued that overbroad non-competes can chill Section 7 rights; field guidance continued into late 2024. Even non-union shops should expect scrutiny where covenants impede switching jobs to improve conditions. (Status of GC memos may shift; monitor NLRB updates.) National Labor Relations Board

Trade secrets (DTSA).
Trade-secret law is your most durable protection when non-competes are limited: use robust NDAs, security protocols, and invention-assignment agreements; DTSA provides federal remedies for misappropriation. Department of Justice

State of play by hotspot jurisdictions

California (CA Bus. & Prof. Code §16600; SB 699; AB 1076).
California not only voids post-employment non-competes—it now makes them unlawful, extends the prohibition to out-of-state contracts, and requires notice to affected workers (Feb. 2024). Courts also cast deep doubt on employee non-solicit clauses; Edwards v. Arthur Andersen rejected customer non-solicits as a backdoor non-compete, and AMN Healthcare enjoined employee non-solicits. Use NDAs/trade-secret tools instead. Justia+3Latham & Watkins+3Akerman LLP+3

Minnesota (Minn. Stat. §181.988).
As of July 1, 2023, Minnesota bans most employment non-competes (including for contractors), with narrow exceptions (e.g., sale of business). Non-solicit and NDA provisions remain generally permissible. Revisor Minnesota+1

Washington (RCW 49.62).
Non-competes are unenforceable unless the worker earns at least $123,394.17 (2025) (and $308,485.43 for independent contractors), adjusted annually. Terms beyond 18 months are presumptively invalid. Wa State Labor & Industries+2Foley & Lardner LLP+2

Colorado (C.R.S. §8-2-113).
Non-competes limited to highly compensated workers and only to protect trade secrets; the HCE threshold is indexed (>$127k in 2025, climbing). Statutory penalties apply for presenting unlawful agreements; separate 2025 legislation further tightened healthcare-worker rules. Mulliken+2bertramllp.com+2

Illinois (Freedom to Work Act).
Non-competes banned for workers under set income thresholds (indexed over time) with additional sector carve-outs under pending proposals; non-solicits have their own thresholds/requirements. Check latest thresholds before drafting. GRSM+2Law Office of Andrew Szocka, P.C.+2

Practical takeaway: In ban states (CA, MN, ND, OK) and threshold states (WA, CO, IL, MA, OR, DC), expect aggressive enforcement—and potential civil penalties—for overreaching covenants.

What still works in 2025 (and where)

  1. Confidentiality & Trade-Secret Protection (Everywhere).
    Well-drafted NDAs; granular definition of “Confidential Information”; BYOD and offboarding controls; immediate return-of-materials; DTSA whistleblower notice language. Department of Justice
  2. Narrow Customer Non-Solicit (Most jurisdictions, not CA).
    Outside California and a few outliers, customer non-solicits tied to legitimate interests (trade secrets/goodwill) and reasonable in scope/duration/geography remain enforceable. In California, customer and employee non-solicits are generally void. SCOCAL+1
  3. Employee Non-Solicit (Many states, not CA; use with care).
    Often enforceable if limited to active employees, for 12 months or less, with reasonable scope; but in California, courts have invalidated these provisions. Justia+1
  4. Garden Leave / Notice Clauses (Selective).
    Paid notice periods (true compensation during the restricted time) can function like a softer non-compete in some states—ensure continued pay and duty to work or be on leave to reduce risk of being treated as a prohibited restraint.
  5. Sale-of-Business Non-Competes (Broadly Survive).
    Non-competes executed in connection with selling a business remain widely enforceable when reasonable; even California recognizes statutory sale-of-business exceptions. (Be sure the seller actually owns and sells equity/goodwill.) Labor & Employment Law Blog
  6. Training Repayment/Tuition (TRAPs) with Caution.
    Overbroad or punitive TRAPs can be attacked as de facto restraints or wage deductions. Tie amounts to actual, pro-rated costs for portable training and follow state wage-deduction laws.
  7. Invention Assignment & IP Ownership (Standard).
    Use clear present-tense assignment language (“hereby assigns”) and carveouts for employee inventions developed entirely on personal time/resources as required by some states.

What likely doesn’t (or is newly risky)

  • Blanket non-competes for rank-and-file workers (banned/limited in many states; wage-threshold statutes). Wa State Labor & Industries+1
  • Overbroad non-solicits (e.g., every past customer, worldwide, 3 years) without linkage to actual goodwill or secrets.
  • Cross-employer “no-poach” pacts or wage-sharing among competing employers—current antitrust focus. ftc.gov+1
  • California non-solicits (both customer and employee), given Edwards and AMN Healthcare. SCOCAL+1

Drafting architecture that holds up

1) Start with the map.
Document the worker’s state of residence, work location, and the law you’ll designate. If you hire in CA or MN, assume no post-employment non-compete and strip employee non-solicits in CA. (Consider multi-state addenda.)

2) Build the core stack.

  • NDA with DTSA notice; security/offboarding; return-of-materials.
  • IP assignment (present assignment language); moral-rights waiver if applicable.
  • Customer non-solicit (outside CA/ban states) tied to customers the worker actually touched in the 12 months pre-exit; 12 months duration.
  • Employee non-solicit (outside CA) limited to active employees that the worker supervised or worked with; cap at 12 months.
  • Reasonableness recital: legitimate interests (trade secrets, goodwill), tailored scope/geography.
  • Savings/blue-pencil clause where permitted.

3) Add state-specific triggers.

  • Washington: Confirm earnings thresholds (2025: $123,394.17 / $308,485.43); keep covenants ≤18 months absent clear and convincing proof of need. Wa State Labor & Industries
  • Colorado: Use only for HCE and trade-secret protection; include statutory notices and beware penalties for non-compliant forms. Mulliken+1
  • Illinois: Check income thresholds and sector carve-outs before inclusion. GRSM
  • California/Minnesota: Replace non-competes with garden leave (where permissible), robust NDAs, IP, and non-dealing protections that don’t restrain employment; avoid employee/customer non-solicits in CA. Latham & Watkins+1

4) Pair contracts with operations.

  • Access hygiene (need-to-know permissions), DLP logs, and exit interviews with certificate of return.
  • Onboarding: no boilerplate—state-specific annexes with earnings thresholds where applicable.
  • Recruiting: avoid exchanging salary info with competitors; no “gentlemen’s agreements.” Littler Mendelson P.C.

Quick reference: Green/Yellow/Red

  • Green: NDA/DTSA protections; IP assignment; customer non-solicit (most states, tailored); sale-of-business non-compete; reasonable garden leave. Department of Justice
  • Yellow: Employee non-solicit (valid in many states but not CA); training repayment (narrow, pro-rated); non-dealing clauses tied to confidential lists. Justia
  • Red: Broad non-competes below state income thresholds; any post-employment non-compete in ban states; cross-employer no-poach / wage-fixing. Wa State Labor & Industries+2Revisor Minnesota+2

FAQ

Did the FTC ban non-competes nationally?
No. The FTC issued a final rule in April 2024, but a federal court set it aside nationwide; in 2025 the FTC dropped its appeals and acceded to vacatur. State law governs. ftc.gov+2Pillsbury Law+2

Are customer non-solicit clauses still enforceable?
Often yes—outside California and within reason (scope/duration/geography) to protect goodwill or trade secrets. In California, courts treat many non-solicits as unlawful restraints. SCOCAL+1

What’s the safe duration?
Commonly 12 months for non-solicit; some states allow longer with strong justification. Washington presumes 18+ months is invalid for non-competes absent clear and convincing proof. Wa State Labor & Industries

Can we agree with a competitor not to hire each other’s employees?
Not safely. Such pacts may trigger antitrust liability—including potential criminal cases for naked restraints. Use lawful non-solicit with your own employees; do not enter cross-employer agreements. ftc.gov+1

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