Non-Compete Agreement Template

A non-compete agreement template is a reusable contract in which an employee or contractor agrees not to work for a competitor or start a competing business for a set time and area after leaving. Non-competes are heavily regulated in the US, so a usable template must be narrow, reasonable and tailored to the state where the person works.

This guide explains the key clauses, where non-competes are banned or limited, the status of the federal FTC rule and safer alternatives.

What is a non-compete agreement?

A non-compete agreement, or covenant not to compete, restricts someone from competing with a business after the relationship ends. It is one of several “restrictive covenants.” Others include:

• Non-solicitation of customers: do not solicit the company’s clients.
• Non-solicitation of employees: do not recruit the company’s staff.
• Confidentiality or non-disclosure: do not use or share confidential information.

Courts generally view non-competes more skeptically than these other covenants, because they restrict a person’s ability to earn a living.

Are non-compete agreements enforceable?

It depends heavily on the state:

• Broad bans or near-bans: California, Minnesota (for agreements signed since July 1, 2023), North Dakota and Oklahoma generally prohibit employee non-competes, with limited exceptions such as the sale of a business.
• Income thresholds: Several states, such as Colorado, Illinois, Maine, Maryland, Oregon, Washington and others, ban non-competes for workers below certain earnings levels and add notice requirements.
• Reasonableness test: Most other states enforce non-competes only if they protect a legitimate business interest and are reasonable in duration, geography and scope.

Federal status: The FTC issued a rule in 2024 that would have banned most non-competes, but a federal court set it aside before it took effect, and in 2025 the FTC moved to withdraw its appeal. The FTC has said it will continue to address harmful non-competes case by case. Check the current status before relying on any non-compete. Background is available from the FTC.

Key clauses in a non-compete agreement template

Non-compete agreement template outline

• Non-Competition Agreement between [Company] and [Employee], effective [date].
• 1. Purpose: Employee will have access to [trade secrets / key customer relationships], which the company has a legitimate interest in protecting.
• 2. Consideration: In exchange for [new employment / a payment of $X / promotion], Employee agrees to the terms below.
• 3. Restriction: For [12] months after employment ends, Employee will not perform [specific competing services] for [defined competitors] within [geographic area].
• 4. Exceptions: [Passive investments, unrelated roles].
• 5. Notice: Employee received this agreement at least [14] days before signing and was advised of the right to consult an attorney.
• 6. Remedies and 7. Severability.
• 8. Governing law: [State where employee works].
• Signatures.

Safer alternatives to non-competes

In many cases, other agreements protect the business more reliably:

1. Confidentiality agreements protect trade secrets and sensitive information.
2. Customer non-solicitation prevents departing staff from taking clients.
3. Employee non-solicitation prevents team raids.
4. Invention assignment keeps ownership of work product.
5. Retention incentives, such as deferred bonuses, encourage staff to stay.

How to manage restrictive covenant agreements

Because rules differ by state and role, HR teams need a process, not a single document:

1. Determine the employee’s work state and pay level.
2. Generate the right agreement version, or skip the non-compete where it is banned.
3. Deliver it with any required notice period.
4. Collect e-signatures and store them with the employee record.
5. Track agreements and review them when laws change.

How Noca helps

Noca can generate state-specific restrictive covenant agreements using conditional logic, deliver them on the required timeline, collect e-signatures and store signed copies in your HRIS. Learn more about Noca document generation.

This article is for general information and is not legal advice.

Related guides

• Independent Contractor Agreement Template
• Service Agreement Template

Frequently Asked Questions

Are non-compete agreements legal in the US?

Non-competes are legal in many states but are banned or heavily restricted in others. California, Minnesota, North Dakota and Oklahoma broadly prohibit employee non-competes, and many states restrict them by income level or require notice. Where allowed, they must usually be reasonable in scope, duration and geography.

What happened to the FTC non-compete ban?

The FTC adopted a rule in 2024 to ban most non-competes, but a federal court set it aside before it took effect in August 2024. In 2025, the FTC moved to drop its appeal and said it would address non-competes through case-by-case enforcement. Check for current developments before relying on one.

How long can a non-compete last?

There is no single rule, but courts often view restrictions of 6 to 12 months as more reasonable than longer periods, depending on the role and industry. Some states set maximum durations by statute. Restrictions of several years are more likely to be challenged.

What makes a non-compete unenforceable?

A non-compete may be unenforceable if the state bans it, it lacks a legitimate business interest, it is too broad in duration, geography or activities, it lacks adequate consideration where required, or it fails statutory notice requirements. Courts in some states will narrow overly broad terms; others will void them.

What is the difference between a non-compete and a non-solicitation agreement?

A non-compete restricts someone from working for a competitor or starting a competing business. A non-solicitation agreement only restricts actively soliciting the company’s customers or employees. Non-solicitation agreements are generally narrower and more likely to be enforced than non-competes.

Can a non-compete be signed electronically?

Generally yes. Electronic signatures are valid under the ESIGN Act and state UETA laws. Some states require that the employee receive the agreement a certain number of days before signing or be told of the right to consult a lawyer, so the delivery timing should be tracked.