EDIT to Virginia law referenced in “State Laws Effective in 2026 and Beyond”: Effective July 1, 2026, non-compete agreements will be unenforceable if the employer terminated the employee without cause and does not provide severance benefits or other monetary payment. The law will not invalidate agreements entered into, amended, or renewed prior to the effective date. The law builds upon and broadens the state’s existing prohibition on non-compete agreements with “low-wage employees.”
In September 2025, the Federal Trade Commission (FTC) ended its efforts to defend the agency’s final non-compete rule but made clear that this is not the end of its enforcement efforts. FTC Chairman Andrew Ferguson issued a statement announcing that while the FTC would no longer pursue broad rulemaking authority regarding non-compete agreements, the agency would continue to pursue enforcement action against employers on a case-by-case basis. For additional information, see HERE.
As we noted in our 2025 Restrictive Covenant Roundup HERE, many states have stepped in to fill the gaps. This year’s roundup highlights some key laws enacted, compensation threshold updates, and pending legislation that employers should be aware of in 2026. This roundup is not exhaustive—employers should contact our Restrictive Covenant Practice Group to discuss any additional laws, threshold updates, or legislation that may impact your specific organization.
State Laws Effective in 2026 and Beyond
California: Effective as of January 1, 2026, employers are prohibited from including in an employment contract certain training and retention payment provisions and other stay-or-pay provisions. The law exempts certain repayment agreements, including those involving discretionary bonuses, if certain criteria are met. For additional information, see HERE.
Montana: Effective as of January 1, 2026, the law expands existing prohibitions on health care non-competes to cover all physicians. The law exempts agreements related to the sale and purchase of a practice and certain repayment provisions related to loans, relocations costs, signing bonuses, educational expenses, and tuition reimbursement expenses. The law applies to agreements entered into or renewed on or after the effective date.
New York: Effective December 19, 2026, the law prohibits certain agreements that require repayment to the employer if the employment relationship terminates within a specified period of time. The law exempts certain repayment agreements, including those involving bonuses, relocation assistance, non-educational incentives, and other payments or benefits not tied to specific job performance. For additional information, see HERE.
Tennessee: Effective July 1, 2026, the law prohibits non-compete agreements with any employee earning less than $70,000 annually. It also establishes a tiered framework for courts to apply when determining whether a restrictive covenant is reasonable in duration. The law does not prohibit employers from enforcing confidentiality or non-solicitation agreements that meet existing standards for enforceability under state law.
Utah: Effective as of May 6, 2026, employers are prohibited from entering into non-compete agreements with healthcare workers, defined as any individual licensed and practicing in clinical professions, including doctors, nurses, psychologists, and mental health counselors. The law also voids non-solicitation agreements that prevent healthcare workers from informing patients of their current or future workplace.
Virginia: Effective July 1, 2026, non-compete agreements will only be enforceable if the employer terminated the employee without providing severance benefits or other monetary payment, unless the employee was terminated for cause. The law will not invalidate agreements entered into, amended, or renewed prior to the effective date. The law builds upon and broadens the state’s existing prohibition on non-compete agreements with “low-wage employees.”
Washington State: Effective June 30, 2027, nearly all non-compete agreements will become void and unenforceable, including agreements with higher-salaried employees. By October 1, 2027, employers must notify affected current and former employees that their non-compete agreements are no longer enforceable. The law provides limited exemptions, including certain narrowly-drafted confidentiality, non-solicitation, and education repayment provisions.
Compensation Threshold Updates for 2026
Colorado: The compensation thresholds have increased for non-compete agreements to $130,014 and for non-solicitation agreements to $78,008.40.
District of Columbia: The compensation threshold for non-compete agreements has increased to $162,164.
Maine: The compensation threshold for non-compete agreements has increased to $63,840.
Oregon: The compensation threshold for non-compete agreements has increased to $119,541.
Rhode Island: The compensation threshold for non-compete agreements with “low wage employees” has increased to $39,900.
Virginia: The compensation threshold for non-compete agreements with “low wage employees” has increased to $78,364.52.
Washington: The compensation thresholds for non-compete agreements have increased for employees to $126,858.83 and for independent contractors to $317,147.09.
Legislation Pending in 2026
Connecticut: HB5492 would make non-compete agreements void and unenforceable if the worker’s hourly wage is less than two times the minimum fair wage, or the restriction applies to either (1) geographic areas where the worker did not provide services in the two years preceding separation, or (2) types of work the worker did not perform in the two years preceding separation.
Illinois: HB1642 would prohibit non-compete and non-solicitation agreements with any employee earning $300,000 annually or less. Additionally, HB2561 would prohibit non-compete and non-solicitation agreements with any reproductive or maternity health care professional if it would reduce the availability of reproductive or maternity care.
Indiana: SB132 would prohibit non-compete agreements with any employee earning less than $150,000 annually.
Massachusetts: S1336 would prohibit and void all non-compete agreements.
New Hampshire: HB1188 would prohibit non-compete agreements with employees earning an hourly rate of less than or equal to 500% of the federal minimum wage.
New Jersey: SB1407/A1829 would prohibit entering into or enforcing non-compete agreements with any worker. Existing non-compete agreements with a “senior executive,” defined as a worker in a “policy-making position” compensated at least $151,164 annually, may be enforceable if—within 30 days of the effective date—the employer provides written disclosure of requirements under the law and revisions made to comply with the law.
New York: SB4641 would prohibit enforcement of non-compete agreements for employees earning less than $500,000 annually and for certain health-related professionals, regardless of income. The bill provides limited exceptions, including agreements related to the sale of a business or majority ownership interest in a business. For additional information, see HERE.
Rhode Island: S2160 would render void and unenforceable all non-compete agreements, unless the employee earns over $125,000 annually, or the agreement relates to the sale of a business or equity interest in a business.
Vermont: HB205 would ban non-compete agreements in franchise contracts, and with employees earning less than $100,000 annually.
Virginia: SB128 would prohibit entering into or enforcing non-compete agreements with any health care professional, including licensed physicians, nurses, mental health professionals, or social workers.
Employer Takeaways
As state-level scrutiny of restrictive covenants continues to intensify, employers should proactively re-evaluate their agreements and practices to ensure they are enforceable and appropriately tailored to each covered employee. This includes assessing which employees may be bound, what terms may be imposed, and whether those terms comply with evolving state-specific requirements. Employers operating across multiple jurisdictions must ensure compliance with all applicable laws, including varying compensation thresholds and statutory limitations.
To mitigate risk, employers should consider the following:
- Contact our Restrictive Covenant Practice Group to discuss any additional laws, legislation, or threshold updates that may impact your specific organization;
- Revise agreements and offer letters to reflect state-specific requirements;
- Audit agreements to identify employees who may no longer meet updated compensation thresholds;
- Tailor agreements and policies to protect your organization’s legitimate business interests;
- Explore alternatives to non-compete agreements that may accomplish the goal of protecting legitimate business interests; and
- Continue to monitor for updates on pending legislation.
If you have any questions related to any restrictive covenant updates, or need assistance reviewing your non-compete agreements and practices, please reach out to the NFC Attorney with whom you typically work or call us at 973.665.9100 or 619.292.0515.