Restrictive covenants are the promises an employer asks a worker to make about competing, soliciting, and handling information after the working relationship ends. The most common are the non-compete (don't work for a competitor), the customer non-solicit (don't pursue the employer's customers), the employee non-solicit / no-poach (don't recruit former colleagues), and the confidentiality / trade-secret covenant (don't use or disclose protected information). How far each can reach — and whether it is enforceable at all — turns on the law of the governing state, but a common analytical spine runs through almost every US jurisdiction. This note explains that spine and links to the per-state practice notes and the 50-state survey for the jurisdiction-specific detail. If you are reviewing someone else's draft clause by clause, the Non-Compete Agreement Review Checklist walks the full covenant suite item by item with each requirement's force level and citations.
What standard do courts use to decide whether a restrictive covenant is enforceable?
Most states enforce a post-employment restraint only to the extent it is reasonable. The classic formulation, drawn from the common law of contracts, treats a covenant as an unreasonable restraint of trade if it is greater than is needed to protect the employer's legitimate interest, or if that need is outweighed by the hardship to the worker and the likely injury to the public. A minority of states go further and make employee non-competes void as a matter of law regardless of reasonableness.
This is a two-sided balancing test, not a checklist of fixed numbers. An employer must first identify a legitimate interest and tailor the restraint to it in duration, geography, and the activity restricted; even a narrowly drawn restraint can fail if the burden on the worker and the harm to the public outweigh the employer's need. Because the limits are judge-made in most states, there is rarely a statutory ceiling on duration or territory — reasonableness is decided case by case, and the controlling rules vary from state to state .
A handful of states — and a growing number for lower-wage workers — ban employee non-competes outright, so reasonableness never enters the analysis. Always start with the governing state's rule before tailoring terms; consult the per-state note and the 50-state survey rather than assuming the common-law reasonableness test applies .
Sources for this answer
Case law · 2012-10-12
A.1 Restatement (Second) of Contracts § 188 (as quoted in August Healthcare Group, LLC v. Manglona)The black-letter rule of reason treats an ancillary restraint as unreasonable if it is greater than needed to protect the employer's legitimate interest, or if that need is outweighed by the hardship to the worker and the likely injury to the public.
A promise to refrain from competition that imposes a restraint that is ancillary to an otherwise valid transaction or relationship is unreasonably in restraint of trade if (a) the restraint is greater than is needed to protect the promisee's legitimate interest, or (b) the promisee's need is outweighed by the hardship to the promisor and the likely injury to the public.
See Restatement (Second) of Contracts § 188 (Am. L. Inst. 1981), quoted in August Healthcare Grp., LLC v. Manglona, No. 1:12-cv-00008, 2012 WL 12926085 (D. N. Mar. I. Oct. 12, 2012).
What legitimate business interests can a restrictive covenant protect?
Courts generally recognize trade secrets and other confidential information, substantial customer relationships and goodwill, and specialized or extraordinary training as legitimate interests that can justify a narrowly tailored restraint. Ordinary competition and a worker's general skill and experience are not protectable. The uniform definition of a trade secret anchors the first category: information that derives independent economic value from not being generally known and that is the subject of reasonable efforts to keep it secret.
The trade-secret definition matters because it sets the floor for what confidentiality and non-disclosure covenants can lock up. Information that is publicly known, readily ascertainable, or not actually guarded is not a trade secret, and a covenant cannot manufacture a protectable interest where none exists. The same definition appears, with minor variations, in the Uniform Trade Secrets Act adopted by most states and in the federal Defend Trade Secrets Act.
A naked interest in avoiding competition is not a legitimate business interest in any state. Tie each covenant to a specific, evidenced interest — a genuine trade secret, a substantial customer relationship, or extraordinary training — because a restraint that protects only against ordinary competition is the kind most likely to be struck or narrowed .
Sources for this answer
Primary law
B.1 Uniform Trade Secrets Act § 1(4) (as codified at 10 M.R.S. § 1542(4))PDFThe UTSA defines a trade secret as information that derives independent economic value from not being generally known or readily ascertainable, and that is the subject of reasonable efforts to maintain its secrecy.
Derives independent economic value, actual or potential, from not being generally known to and not being readily ascertainable by proper means by other persons who can obtain economic value from its disclosure or use
See Unif. Trade Secrets Act § 1(4) (Unif. L. Comm'n 1985); 10 M.R.S. § 1542(4).
Primary law
B.2 Defend Trade Secrets Act — definition of a trade secret, 18 U.S.C. § 1839The federal Defend Trade Secrets Act adopts a parallel definition keyed to information that derives independent economic value from not being generally known or readily ascertainable.
the information derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information
See 18 U.S.C. § 1839(3)(B) (2018).
How do trade-secret protection and the NLRA limit confidentiality covenants?
Trade-secret protection can last as long as the information stays secret, so confidentiality covenants are not bound by the durational limits that constrain non-competes. But two federal overlays cut the other way. The Defend Trade Secrets Act requires employers to give a statutory immunity notice in any agreement that governs trade secrets or confidential information, and the National Labor Relations Act bars confidentiality and non-disparagement terms drafted so broadly that they chill employees' protected right to discuss wages and working conditions.
The immunity-notice requirement is easy to miss and carries a real penalty: an employer that omits it cannot recover exemplary damages or attorney's fees against an employee in a later trade-secret suit. Federal trade-secret law also will not, by itself, keep a worker out of a new job — an injunction against threatened misappropriation may not bar someone from entering an employment relationship merely because of what they know.
Two cross-cutting traps. First, include the DTSA whistleblower-immunity notice (or a cross-reference to a compliant policy) in every confidentiality, non-disclosure, or assignment agreement, or forfeit enhanced trade-secret remedies. Second, do not draft confidentiality or non-disparagement clauses so sweepingly that they reach an employee's discussion of pay or working conditions — even merely offering such a clause can violate the NLRA.
Sources for this answer
Primary law
C.1 Defend Trade Secrets Act — employer immunity-notice requirement, 18 U.S.C. § 1833(b)The DTSA requires an employer to give notice of the trade-secret whistleblower immunity in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
An employer shall provide notice of the immunity set forth in this subsection in any contract or agreement with an employee that governs the use of a trade secret or other confidential information.
See 18 U.S.C. § 1833(b)(3)(A) (2018).
Primary law
C.3 Defend Trade Secrets Act — limits on injunctions, 18 U.S.C. § 1836(b)A DTSA injunction against threatened misappropriation may not prevent a person from entering an employment relationship, and any conditions on employment must rest on evidence of threatened misappropriation, not merely on what the person knows.
prevent a person from entering into an employment relationship, and that conditions placed on such employment shall be based on evidence of threatened misappropriation and not merely on the information the person knows
See 18 U.S.C. § 1836(b)(3)(A)(i)(I) (2018).
Agency guidance · 2023-02-21
C.2 NLRB news release on McLaren Macomb, 372 NLRB No. 58 (2023)The NLRB held that simply offering employees a severance agreement requiring them to broadly waive their Section 7 rights — including through overly broad confidentiality and non-disparagement terms — violates Section 8(a)(1) of the National Labor Relations Act.
simply offering employees a severance agreement that requires them to broadly give up their rights under Section 7 of the Act violates Section 8(a)(1) of the Act.
See McLaren Macomb, 372 NLRB No. 58 (2023); NLRB Office of Public Affairs, Board Rules That Employers May Not Offer Severance Agreements Requiring Employees to Broadly Waive Labor Law Rights (Feb. 21, 2023).
What happens to an overbroad covenant — and what consideration supports one?
States diverge sharply on three recurring mechanics, so the base rule is that the governing state's law controls each one. Courts split on whether they will reform an overbroad covenant — rewriting it to a reasonable scope, striking only the offending words (blue-pencil), or refusing to enforce it at all. They split on whether the restricted period is tolled while the worker is in breach. And they split on what consideration supports a covenant signed after employment begins, with some states accepting continued at-will employment and others requiring something more. The common thread is the reasonableness ceiling: a restraint may be enforced only so far as it is no greater than needed to protect a legitimate interest.
Because reformation, tolling, and post-hire consideration each turn on state law, the 50-state survey records the rule for every jurisdiction. What is uniform is the analytical limit a reforming court applies: even where a court will narrow rather than void, it enforces only the portion of the restraint that is reasonably necessary, measured against the same rule of reason that governs enforceability in the first place .
Do not assume a covenant tolls automatically during a breach, that a court will rewrite an overbroad term rather than void it, or that continued employment is enough consideration. Each of those depends on the governing state. Build any tolling or extension-on-breach mechanism into the contract expressly, draft to the reasonable scope you actually need, and confirm the state's consideration rule before relying on a post-hire signature .
Sources for this answer
Case law · 2012-10-12
D.1 Restatement (Second) of Contracts § 188 (as quoted in August Healthcare Group, LLC v. Manglona)The reasonableness ceiling a reforming court applies is the same rule of reason: a restraint is unreasonable to the extent it is greater than needed to protect the employer's legitimate interest, or that need is outweighed by hardship to the worker and injury to the public.
A promise to refrain from competition that imposes a restraint that is ancillary to an otherwise valid transaction or relationship is unreasonably in restraint of trade if (a) the restraint is greater than is needed to protect the promisee's legitimate interest, or (b) the promisee's need is outweighed by the hardship to the promisor and the likely injury to the public.
See Restatement (Second) of Contracts § 188 (Am. L. Inst. 1981), quoted in August Healthcare Grp., LLC v. Manglona, No. 1:12-cv-00008, 2012 WL 12926085 (D. N. Mar. I. Oct. 12, 2012).
Is there a federal ban on non-competes?
No federal ban is currently in effect. The Federal Trade Commission's 2024 rule that would have barred most employee non-competes nationwide was set aside by a federal court before its effective date, so enforceability remains a question of state law. The FTC may still pursue case-by-case antitrust enforcement — for example, against naked no-poach agreements between rival employers — but there is no nationwide ban displacing state law.
A federal district court in Texas held the FTC exceeded its statutory authority and that the rule was arbitrary and capricious, then set the rule aside with nationwide effect under the Administrative Procedure Act. The rule never took effect on its scheduled date, and the FTC later moved to conform the Code of Federal Regulations to the court's decision .
Sources for this answer
Case law · 2024-08-20
E.1 Ryan, LLC v. Federal Trade Commission (N.D. Tex. 2024)A federal district court set aside the FTC's Non-Compete Rule, holding it would not take effect or be enforced on its effective date or thereafter.
The Rule shall not be enforced or otherwise take effect on its effective date of September 4, 2024 or thereafter.
See Ryan, LLC v. FTC, No. 3:24-CV-00986-E, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024).