A non-compete agreement is a clause that stops you working for a competitor, or starting a competing business, for a period after you leave a job. Whether it binds you depends on where you work: there's no nationwide US ban after the FTC moved to accept the vacatur of its rule in 2025, California voids them in employment, and Ontario has banned new ones for most employees since 25 October 2021.
That makes non-competes one of the most location-dependent rules in employment law. Below is what the official sources say, as of October 2026, for the US federal position, California and Ontario, plus how a non-compete differs from the clauses that often sit next to it.
What counts as a non-compete
The FTC's rule text defined it broadly: a term or condition of employment that prohibits, penalizes or 'functions to prevent' a worker from seeking or accepting other work, or operating a business, after the job ends. Ontario's definition is similar and adds that a clause is still a non-compete whether or not it's limited in time or geography. Its examples: a six-month ban, or a ban within 100 km of the workplace, are both non-competes.
The rules by place
| Where | Status as of October 2026 | Main exceptions |
|---|---|---|
| US (federal) | No federal ban. The FTC filed in September 2025 to accede to the vacatur of its Non-Compete Clause Rule | State law decides |
| California | Void: every contract restraining a lawful profession, trade or business is void to that extent (B&P Code 16600) | Exceptions listed in the same chapter |
| Ontario | Banned for agreements made on or after 25 October 2021 | Sale of a business where the seller becomes an employee; executives |
| Ontario (older agreements) | Not banned by the ESA if made before 25 October 2021 | Courts and common law decide |
The FTC rule, and why it isn't in force
In 2024 the FTC adopted a rule treating most non-competes as an unfair method of competition. It would have let existing clauses stand only for senior executives earning at least $151,164 in policy-making roles, according to the rule text, and required employers to notify other workers that their clauses couldn't be enforced. Courts set it aside, and in September 2025 the FTC filed to accede to that vacatur. So the federal ban never took effect. The practical result: your non-compete is judged under your state's law.
California: void, however narrow
Section 16600 says every contract restraining anyone from a lawful profession, trade or business is void to that extent. The 2023 amendment (AB 1076) goes further, telling courts to read it broadly to void any employment non-compete, 'no matter how narrowly tailored', unless it fits a statutory exception. It also applies even where the restrained person isn't a party to the contract. If you work in California and signed one, it's very unlikely to stop you taking a job.
Ontario: banned since 2021
The Employment Standards Act prohibits employers from entering into a non-compete with an employee, before, during or after the employment. Two exceptions remain:
- A sale or lease of a business run as a sole proprietorship or partnership, where the seller immediately becomes the buyer's employee.
- Executives, such as chief executive, president, chief financial officer and other chief-level roles.
Substance beats labels. Ontario's guide gives an example of a clause headed 'Non-Competition' that only stops an ex-employee contacting former customers; because it's about soliciting, not competing, it isn't a non-compete. Employees can file a claim with the Ministry if they were made to sign a prohibited one, or penalized for refusing. More in our Employment Standards Act guide.
Non-compete vs non-solicit vs NDA
| Clause | What it stops | Ontario ESA |
|---|---|---|
| Non-compete | Working for a competitor or competing | Banned (with two exceptions) |
| Non-solicit | Pursuing clients, customers, suppliers or staff | Not prohibited by the ESA |
| Non-disclosure | Sharing confidential information and processes | Not prohibited by the ESA |
That's why employers increasingly rely on non-solicit and confidentiality terms instead. They protect the client list and the know-how, which is usually what the employer wanted from a non-compete in the first place. If you're drafting a contract, our employment contract template is a starting point, but get the restrictive clauses reviewed locally.
What to do if you've signed one
- Find the governing law clause: which state or province's law applies?
- Check the date you signed it, because Ontario's ban only covers agreements made on or after 25 October 2021.
- Read the scope: how long, what area, which activities.
- Separate it from the non-solicit and confidentiality clauses, which may survive even if the non-compete doesn't.
- If you're in Ontario and were made to sign one after 2021, you can file a claim with the Ministry.
For employers outside California and Ontario, a narrow clause tied to a real business interest is far more defensible than a blanket ban, and many now skip non-competes for junior staff entirely.
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One more thing to check is consideration. A clause added mid-employment, with nothing given in return, is often weaker than one agreed at hiring, though how much weaker depends on the jurisdiction. Ask for it in writing either way.
The verdict
Before you turn down a job because of a non-compete, find out which law governs it. In California and, for most employees, Ontario, the clause is probably unenforceable. Elsewhere in the US it depends on your state, the clause's scope and your role, so it's worth an hour with an employment lawyer before you resign, and before you tell your new employer it won't be a problem. Either way, a non-solicit or NDA is far more likely to bind you, so read those lines as carefully as the headline one.
For the clause that often gets confused with this one, see my guide to the clause that stops you poaching clients and staff.
Frequently asked questions
Are non-compete agreements legal in the US?
There's no federal ban: the FTC's rule was vacated and in September 2025 the FTC filed to accede to that. Each state's law decides, and California voids them in employment.
Are non-competes enforceable in California?
No. Business and Professions Code 16600 voids employment non-competes, however narrowly drafted, unless a statutory exception applies.
Are non-compete agreements banned in Ontario?
Yes, for agreements made on or after 25 October 2021, except for executives and certain sales of a business.
What is the difference between a non-compete and a non-solicit?
A non-compete stops you working for a competitor; a non-solicit only stops you pursuing the employer's clients, suppliers or staff.
