The FTC’s attempt to ban non-compete agreements nationwide collapsed in 2024 when a federal court struck down the rule as exceeding the agency’s authority. Since then, non-compete agreement technology companies 2026 enforceability has become a state-by-state puzzle that every founder, CTO, and general counsel must solve individually. Some states void these clauses entirely. Others allow them only above specific income thresholds. And the FTC still reserves the right to challenge overly broad agreements on a case-by-case basis under Section 5 of the FTC Act.
For technology companies that rely on proprietary code, trade secrets, and specialized talent, the stakes are high. A poorly drafted non-compete can be unenforceable, exposing your IP to competitors. An overly aggressive one can deter top candidates from joining your team. This article breaks down what tech companies can and cannot enforce in 2026, which states matter most, and what alternatives actually protect your business.
1. What Happened to the FTC’s Blanket Ban
In April 2024, the FTC voted to adopt a final rule banning most non-compete clauses nationwide. The rule never took effect. In Ryan LLC v. Federal Trade Commission (N.D. Tex., August 2024), Judge Ada E. Brown vacated the rule, holding that Congress never granted the FTC substantive rulemaking authority under Section 6(g) of the FTC Act. The court also found the rule “unreasonably overbroad.”
On September 5, 2025, the FTC formally dismissed its appeal and acceded to the vacatur. The rule was removed from the Federal Register entirely.
However, the FTC has not abandoned enforcement. In January 2026, the agency hosted a workshop titled “Moving Forward: Protecting Workers from Anticompetitive Noncompete Agreements.” Then in April 2026, the FTC ordered Rollins, Inc. to stop enforcing its non-competes across 18,000+ employees. The current posture: case-by-case enforcement under Section 5, focusing on low-wage workers, excessively broad agreements, and industries where employees lack meaningful access to trade secrets.
For tech companies, this means federal regulators are watching but not imposing blanket restrictions. State law remains the primary battlefield.
2. States That Ban Non-Competes Entirely
Several states have decided the question outright. If your employees work in any of these jurisdictions, traditional non-compete clauses are void regardless of the employee’s role or compensation level:
- California (Bus. & Prof. Code Section 16600; SB 699, 2023): The most aggressive ban in the country. SB 699 added extraterritorial reach, meaning California-based employers cannot enforce out-of-state non-competes against California residents.
- Minnesota (Minn. Stat. Section 181.988, effective July 2023): Complete ban with only a sale-of-business exception.
- North Dakota (N.D. Cent. Code Section 9-08-06): Longstanding prohibition, sale-of-business exception only.
- Oklahoma (15 Okla. Stat. Sections 217-219A): Similar to North Dakota with narrow exceptions.
- Washington, D.C. (D.C. Code Section 32-581.01 et seq., effective October 2022): Bans non-competes for virtually all employees.
- Washington State (HB 1155, signed March 2026): Near-total ban effective June 30, 2027, retroactively voiding existing covenants.
If your tech company is headquartered in California or employs remote workers in any of these states, standard non-compete language will not hold up in court. A qualified technology lawyer can help you identify which protective measures remain available in these jurisdictions.
3. States with Income-Based Thresholds
A growing number of states allow non-competes only for employees earning above a specified annual salary. For gechnology companies, where even junior engineers often exceed these thresholds, this matters for structuring agreements across your entire workforce:
- Colorado (C.R.S. Section 8-2-113): $130,014/year for non-competes; $78,008/year for non-solicitation agreements. Adjusted annually.
- Washington State (RCW 49.62, until June 2027 ban takes effect): $126,858.83 for employees; $317,147.09 for independent contractors.
- Illinois (820 ILCS 90, Freedom to Work Act): $75,000 for non-competes; $45,000 for non-solicitation agreements.
- Oregon (ORS 653.295): $119,541/year in 2026, with a maximum 12-month duration cap.
- Massachusetts (Mass. Gen. Laws ch. 149, Section 24L): Employee must be FLSA-exempt, employer must provide garden-leave pay, and maximum duration is 12 months.
Virginia added another layer in 2026: SB 170 (effective July 1, 2026) makes non-competes unenforceable against employees terminated without cause unless the employer provides severance disclosed at the time of signing.
For startup founders hiring across multiple states, these thresholds create a compliance matrix that demands careful planning. A single template agreement will not work for a distributed team.
4. What Courts Actually Look at When Enforcing Non-Competes
In states where non-competes remain legal, courts evaluate them using a reasonableness standard. Technology companies face particular scrutiny because the line between “general skills” and “trade secrets” is often blurry in software development. Courts typically examine:
- Duration: 6 to 12 months is generally enforceable. Anything beyond 24 months is suspect in most jurisdictions.
- Geographic scope: For SaaS and remote-first companies, geographic restrictions are increasingly irrelevant. Courts prefer functional limitations (specific product categories or client segments).
- Protectable interest: The employer must demonstrate a legitimate business interest beyond simply preventing competition. Trade secrets, client relationships developed at company expense, and specialized training investments all qualify.
- Hardship on the employee: A restriction that prevents a developer from working in their entire field will face more skepticism than one limited to direct competitors building the same product category.
- Adequate consideration: Many states require something beyond continued at-will employment. Signing bonuses, equity grants, or access to proprietary training can satisfy this requirement.
A contract attorney familiar with technology employment agreements can draft restrictions that survive judicial review while remaining narrow enough to attract top talent.
5. Practical Alternatives That Protect Your Business
Given the legal uncertainty around non-competes, most technology companies in 2026 rely on a layered approach using several complementary agreements:
Proprietary Information and Inventions Agreements (PIIAs)
These assign ownership of all work product and intellectual property to the employer. They are standard in tech hiring and enforceable in all 50 states with appropriate carve-outs. Note that 11 states (including California, Washington, and Illinois) restrict what employers can claim over inventions developed entirely on the employee’s own time and resources. Your intellectual property lawyers should tailor these clauses to each state where you have employees.
Non-Solicitation Agreements
These restrict former employees from soliciting your clients, customers, or current team members for a defined period (typically 12 to 18 months). They are narrower than non-competes and survive legal challenge more consistently because they target specific harm without preventing someone from working at a competitor.
Garden Leave Provisions
The employee provides advance notice of departure (typically 60 to 90 days), remains employed and paid during that period, but cannot begin work elsewhere. Because the employee receives full compensation, courts view garden leave more favorably than unpaid restrictive covenants. Massachusetts now requires garden-leave pay or equivalent consideration for any non-compete to be enforceable.
Trade Secret Protections Under the DTSA
The federal Defend Trade Secrets Act (2016) provides a cause of action for misappropriation without requiring any pre-signed agreement. Companies can pursue injunctions and damages if a former employee actually uses or discloses trade secrets. Internal classification policies that clearly mark confidential materials strengthen these claims significantly.
The Recommended Stack for 2026
Employment attorneys specializing in technology recommend combining these protections:
- PIIA (IP assignment + confidentiality) signed at hire
- Non-solicitation of clients and employees (12 to 18 months)
- Garden leave for senior and key technical employees (3 to 6 months paid)
- Internal trade secret classification policies
- Confirmatory IP assignment deed executed on departure
This layered approach protects proprietary information and client relationships without triggering the enforceability problems that traditional non-competes face in most states.
6. What Tech Companies Should Do Now
The legal landscape for non-compete agreement technology companies 2026 demands action, not waiting. Here is what your legal team should prioritize:
- Audit existing agreements: Identify which employees signed non-competes and whether those clauses are enforceable under current state law. Washington State’s 2027 retroactive void date means even previously valid agreements may soon expire.
- Map your workforce by jurisdiction: Remote-first companies need to know which state’s law applies to each employee. Choice-of-law provisions do not always override the employee’s home state protections.
- Transition to the layered approach: Replace unenforceable non-competes with PIIAs, non-solicitation agreements, and garden leave provisions that provide real protection.
- Update departure processes: Exit interviews should include trade secret reminders, return-of-materials confirmations, and signed departure IP acknowledgments.
- Monitor FTC enforcement actions: The agency’s case-by-case approach means any company with unusually broad restrictions could become a target.
Working with a TOS Lawyer who understands both technology contracts and multi-state employment law ensures your protective agreements hold up when they matter most.
Frequently Asked Questions
Are non-compete agreements still legal for tech employees in 2026?
It depends entirely on the state. California, Minnesota, North Dakota, Oklahoma, and Washington, D.C. ban them outright. Colorado, Illinois, Oregon, and Washington allow them only above income thresholds. In states without specific restrictions, courts apply a reasonableness test evaluating duration, scope, and whether the employer has a legitimate protectable interest.
Did the FTC successfully ban non-competes nationwide?
No. The FTC adopted a final rule in April 2024, but a federal court in Texas struck it down in August 2024, finding the agency lacked statutory authority. The FTC dismissed its appeal in September 2025. No federal ban exists. The FTC now pursues enforcement on a case-by-case basis under Section 5 of the FTC Act.
Can my California-based company enforce a non-compete against a remote employee in Texas?
California’s SB 699 (2023) added extraterritorial reach, meaning California employers generally cannot require non-competes even for out-of-state workers. However, if the employee resides in Texas and never works from California, Texas law may apply depending on the choice-of-law provision. These cross-border questions require specific legal analysis.
What is the best alternative to a non-compete for protecting trade secrets?
A combination of a Proprietary Information and Inventions Agreement (PIIA), a non-solicitation clause, and strong internal trade secret classification policies provides the most reliable protection. The federal Defend Trade Secrets Act gives you a cause of action for misappropriation regardless of any signed agreement, but proper documentation strengthens your position significantly.
How long can a non-compete restriction last in states that allow them?
Most courts find 6 to 12 months reasonable for technology roles. Oregon caps duration at 12 months by statute. Massachusetts also imposes a 12-month maximum. Beyond 18 months, enforceability drops sharply in nearly every jurisdiction. Courts are more likely to enforce shorter restrictions paired with adequate consideration such as signing bonuses or equity.
Does Washington State’s 2026 law retroactively void existing non-competes?
Yes. HB 1155, signed in March 2026, creates a near-total ban effective June 30, 2027, and retroactively voids existing covenants for Washington-based employees. Companies with employees in Washington should begin transitioning to alternative protective agreements now rather than waiting for the effective date.
Protect Your Tech Company the Right Way
The rules governing non-compete agreement technology companies 2026 have shifted permanently. Blanket restrictions are out. Targeted, well-drafted protective agreements are in. Whether you need to audit existing employee agreements, build a multi-state compliance framework, or transition from non-competes to enforceable alternatives, Hansen Tong and the team at TOS Lawyer bring focused experience in technology contracts and employment restrictions.
Contact TOS Lawyer to schedule a consultation and get your protective agreements aligned with what courts will actually enforce in 2026.