What clauses are required in a United States Non-Compete/Non-Disclosure Agreement?

United States law requires specific provisions including: Non-Compete Restrictions, Legitimate Business Interest, Consideration for Non-Compete. contract.diy automatically includes all mandatory clauses with proper legal citations when generating your Non-Compete/Non-Disclosure Agreement.

What terms are prohibited in a United States Non-Compete/Non-Disclosure Agreement?

Under United States law, certain provisions are void or unenforceable, including: Perpetual or unlimited non-compete restriction; Worldwide geographic restriction without justification. contract.diy is built to avoid these terms and will warn you if your description suggests including something that's not legally permissible.

How does contract.diy ensure my Non-Compete/Non-Disclosure Agreement complies with United States law?

Every generated contract goes through 9 automated compliance checks specific to United States. These cover mandatory provisions, prohibited terms, proper citations, and formation requirements. Any issues are flagged before you download.

Can I use this Non-Compete/Non-Disclosure Agreement template outside of United States?

This template is specifically tailored to United States law. Using it in another jurisdiction may result in missing requirements or including provisions that don't apply. We recommend generating a new contract with the correct jurisdiction selected for full compliance.

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Non-Compete/Non-Disclosure Agreement for United States

Generate a non-compete/non-disclosure agreement that complies with United States law — with 7 mandatory clauses and 9 compliance checks built in.

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Key legal considerations

Generate a US non-compete agreement. CRITICAL: Non-compete enforceability varies DRAMATICALLY by state. ENFORCEABILITY LANDSCAPE: - BANNED: California (Bus. & Prof. Code § 16600), Minnesota, North Dakota, Oklahoma prohibit most non-competes. - HEAVILY RESTRICTED: Colorado (must protect trade secrets, pay ≥$123,750 threshold), Illinois ($75,000 salary threshold), Maine (limited to 1 year + garden leave), Oregon, Washington (salary thresholds). - MODERATE: Most states apply reasonableness test. - FTC RULE: The FTC finalized a nationwide ban on most non-competes in 2024, but enforcement has been challenged in federal court. CHECK CURRENT STATUS. REASONABLENESS TEST (majority of states): 1. TIME: Must be limited. 6 months to 2 years is typical. Over 2 years = very hard to enforce. 2. GEOGRAPHY: Must match employer's actual competitive footprint. "Nationwide" or "worldwide" requires justification. 3. SCOPE: Must be limited to actually competing activities, not all work. 4. LEGITIMATE INTEREST: Must protect trade secrets, customer relationships, or specialized training. 5. CONSIDERATION: Some states require independent consideration for existing employees (not just continued employment). BLUE-PENCIL DOCTRINE: Many states allow courts to narrow overly broad restrictions rather than voiding them entirely. Include a reformation clause. GARDEN LEAVE: Providing compensation during the restriction period greatly increases enforceability and is required in some states. ALTERNATIVES: If a full non-compete may not be enforceable, consider: (a) non-solicitation of customers, (b) non-solicitation of employees, (c) NDA/confidentiality agreement, (d) garden leave provisions. STRONGLY recommend selecting specific state for non-compete compliance.

What's required

Mandatory clauses for a valid non-compete/non-disclosure agreement under United States law.

Non-Compete Restrictions
Legitimate Business Interest
Restatement (Second) of Contracts § 188
Consideration for Non-Compete
Blue Pencil / Reformation Clause
Blue-pencil doctrine (adopted in majority of states)
Non-Solicitation (Companion)
Severability
Common law severability doctrine
Electronic Signature Authorization
15 U.S.C. § 7001 (E-SIGN Act)

What's prohibited

Terms and provisions that are void or unenforceable under United States law.

Perpetual or unlimited non-compete restriction
Non-compete clauses without a defined time limit are generally unenforceable under US law. Courts require reasonable time limitations, typically 1-2 years. A perpetual non-compete fails the reasonableness test applied by virtually all US courts.
Common law reasonableness test; Restatement (Second) of Contracts § 188
Worldwide geographic restriction without justification
A worldwide non-compete restriction is generally unenforceable unless the employer's business truly operates on a global scale and the employee had access to global operations. Courts require geographic scope to be tied to the employer's actual competitive area.
Restatement (Second) of Contracts § 188; BDO Seidman v. Hirshberg, 93 N.Y.2d 382 (1999)
Restriction from working in any industry or any business whatsoever
Non-competes must be limited to competing activities. Restrictions that prevent the individual from working in ANY capacity for ANY business are overbroad and unenforceable.

Legal references

Key statutes and regulations that govern non-compete/non-disclosure agreements in United States.

Restatement (Second) of Contracts — Restraint of Trade
Restatement (Second) of Contracts § 188
Establishes the reasonableness test for non-compete agreements: restraint must be reasonable in scope, duration, and geography, and must protect a legitimate business interest.
FTC Non-Compete Rulemaking
FTC Final Rule (2024) — check current enforcement status
The FTC finalized a rule banning most non-competes in 2024, but enforcement has been challenged in court. Check current status.
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State Non-Compete Restrictions
Various state statutes
California (Bus. & Prof. Code § 16600), Minnesota, North Dakota, Oklahoma, and Colorado (with limitations) ban or severely restrict non-competes. Many other states have enacted reform legislation.