Non-compete disputes can feel deceptively simple at first. A clause shows up in an offer letter, employment agreement, equity document, or severance package, and it may look like boilerplate. But once a job change, startup idea, or recruiting conversation enters the picture, that same clause can start shaping where you work, who you talk to, and how much risk follows your next move.
That’s part of what makes non-compete problems so frustrating: people often discover the real stakes after they’ve signed, after they’ve resigned, or after a former employer sends a demand letter. And because non-compete law varies widely by state, industry, compensation level, and contract language, assumptions can get expensive fast. The legal landscape is also still shifting. The Federal Trade Commission has stated that its 2024 nationwide noncompete rule is not in effect and not enforceable, following a federal court order and the FTC’s later steps to dismiss its appeal in September 2025. That leaves workers and businesses largely navigating a patchwork of state law and existing contract doctrines rather than a single national rule.
If you want broader background before diving into the pitfalls, it may help to start with this overview of how these restrictions work, when they’re enforceable, and where the risk usually shows up.
Below are five common non-compete mistakes that can limit your options more than people expect.
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Non-competes are not rare. The FTC has estimated that roughly one in five American workers—about 30 million people—are covered by a non-compete. The agency has also argued that these agreements can suppress wages, reduce mobility, and affect new business formation, even though the current FTC rule is blocked. FTC materials on the rulemaking and related fact sheets have repeatedly pointed to that prevalence, and the agency’s final-rule fact sheet described projected effects on wages, entrepreneurship, and innovation if broad bans were to take hold.
At the same time, states are moving in different directions. California generally treats employee non-competes as void, and its recent laws expanded worker protections, including against attempts to enforce certain out-of-state agreements in California. The California Attorney General’s office summarized those changes under SB 699 and AB 1076. Minnesota now provides by statute that covenants not to compete in employment agreements are void, while preserving separate treatment for nondisclosure agreements and trade secret protections under Minn. Stat. § 181.988. Illinois uses earnings thresholds and other limits under its amended Freedom to Work Act. Colorado, meanwhile, sharply limits restrictive covenants and ties part of the analysis to “highly compensated worker” standards and trade-secret-related exceptions under its restrictive covenant statute.
In other words, a non-compete is rarely just a sentence on paper. It can affect compensation negotiations, timing, geography, recruiting strategy, and even whether a future employer is willing to move forward.
This is one of the most common mistakes because people often assume the contract says everything that matters. In reality, state law may control whether the clause is enforceable at all, whether it has to meet income thresholds, whether notice rules apply, and whether certain professions receive special treatment.
That matters because the legal rules are far from uniform.
In California, employee non-competes are generally void except for limited statutory exceptions, and state officials have recently emphasized that employers can face consequences for entering into or attempting to enforce unlawful provisions. The Attorney General’s office has explained that SB 699 took effect on January 1, 2024, and generally made it illegal to enter into non-competes with California employees, including some agreements signed outside California.
Minnesota moved in a similarly worker-protective direction. Its statute says a covenant not to compete is void and unenforceable, while clarifying that confidentiality and trade-secret protections are treated differently under Minn. Stat. § 181.988.
Illinois takes a different approach. There, a non-compete is generally prohibited unless the employee’s actual or expected annualized earnings exceed statutory thresholds, currently set at $75,000 and scheduled to increase to $80,000 on January 1, 2027.
Colorado also limits these agreements heavily. Its statute generally prohibits non-competes except in narrow categories, including some trade-secret-related situations and certain business-sale contexts, with compensation thresholds and notice requirements playing an important role under C.R.S. § 8-2-113.
The mistake here is not just “not reading the law.” It’s assuming that a scary-looking clause is automatically valid everywhere, or assuming that an invalid clause can simply be ignored without consequence. Sometimes an unenforceable covenant still triggers threats, delays, legal fees, or second thoughts from a prospective employer. An attorney may help evaluate the governing law, forum issues, and whether the agreement is as broad as it first appears.
People often lump restrictive covenants together, but non-competes, non-solicits, confidentiality clauses, non-disparagement clauses, invention assignment provisions, and trade-secret obligations are not interchangeable.