Non-Compete Clauses in 2025: Which States Are Banning Them?
With the job market constantly evolving and becoming more competitive, companies are implementing non-compete clauses in their employees’ contracts to protect their business interests. These clauses restrict employees from working for or starting a similar business after leaving their current employer. However, with debates surrounding the effectiveness and fairness of these clauses, many states are now taking action to limit or prohibit their use. In this article, we will explore the current state of non-compete clauses and which states are taking steps towards banning them in 2025.
The Rise of Non-Compete Clauses
Non-compete clauses have been around for decades, but their use has become more widespread in recent years. Originally intended to prevent high-level executives and employees with trade secrets from joining a competitor company, these clauses are now being included in contracts for low-wage and entry-level positions. According to a study by the Economic Policy Institute, nearly one in five U.S. workers are currently bound by a non-compete agreement.
While companies argue that these clauses protect their intellectual property and investments in training employees, critics claim that they stifle competition, limit job mobility, and ultimately harm workers. The use of non-compete clauses has also been linked to lower wages and reduced job opportunities. In response to these concerns, some states have begun implementing stricter regulations on the use of non-compete clauses, and others are taking steps towards an outright ban.
States Banning Non-Compete Clauses in 2025
California
California has long been a proponent of employee rights and has one of the most restrictive laws regarding non-compete clauses in the country. The state’s Business and Professions Code states that non-compete agreements are void, with a few exceptions for the sale of a business or partnership dissolution. In 2020, California took it a step further by passing Assembly Bill 51, which prohibits employers from requiring employees to sign non-compete agreements. This law takes effect on January 1, 2025, and will make it illegal for California employers to even request that employees sign a non-compete agreement.
Washington
Washington has also been a leader in implementing stricter regulations on non-compete agreements. In 2019, the state passed House Bill 1450, which limits the use of non-compete agreements for employees earning less than $100,000 per year. The law also requires employers to disclose the terms of the non-compete agreement before the employee accepts the job, and it allows employees to seek damages if their former employer tries to enforce an illegal non-compete agreement. This law goes into effect on January 1, 2026.
New Hampshire
New Hampshire is another state that has taken steps towards limiting non-compete agreements. In 2019, New Hampshire passed Senate Bill 197, which prohibits employers from using non-compete agreements for low-wage employees earning less than 200% of the federal minimum wage. The bill also requires employers to provide a copy of the non-compete agreement to employees before or at the time of hiring. This law goes into effect on September 8, 2022.
Oregon
In June 2021, Oregon passed Senate Bill 169, which bans the use of non-compete agreements for any employee earning less than $100,533 per year. The law also requires employers to provide a written copy of the non-compete agreement to the employee within 30 days after termination. This law goes into effect on January 1, 2022.
The Future of Non-Compete Clauses
Non-compete clauses have faced increasing scrutiny in recent years, and it is likely that more states will follow in the footsteps of California, Washington, New Hampshire, and Oregon. Several other states, including Illinois, New York, and Massachusetts, have also proposed legislation to restrict or ban non-compete agreements. With the growing trend towards limiting these clauses, it is possible that non-compete agreements may become a thing of the past in the near future.
In conclusion, non-compete clauses have been a controversial topic for both employers and employees. While some argue that they are necessary to protect a company’s interests, others believe that they are unfair and limit job opportunities. With more states taking steps towards banning or restricting their use, it will be interesting to see how non-compete clauses will continue to evolve in the years to come.
