NDA vs non-compete: what each one restricts

An NDA (non-disclosure agreement) restricts what someone may say or use — confidential information they receive. A non-compete restricts where someone may work after the relationship ends. A non-solicitation clause sits between them, restricting who someone may approach: former customers or colleagues. The practical difference is enforceability. NDAs are enforced routinely across all states; non-competes are void in California, Minnesota, North Dakota and Oklahoma, and restricted in many other states, frequently by earnings thresholds.

Side by side

	NDA	Non-solicitation	Non-compete
Restricts	disclosure and use of information	approaching customers or employees	working for a competitor or starting one
Typical duration	2–5 years, or indefinite for trade secrets	1–2 years	6–24 months where permitted
Enforceability	strong in all states	mixed; void in California	void in CA, MN, ND, OK; limited elsewhere
Usual trigger	sharing plans, code, customer data	employee departure	employee departure
Consideration	often signing the agreement	often continued employment	frequently requires more, varies by state

Why non-competes keep narrowing

Beyond the four states that void them outright, the trend in state legislation has been to restrict rather than expand: income thresholds below which a non-compete cannot apply, mandatory notice before signing, carve-outs for healthcare workers or hourly staff, and requirements that the restriction be no broader than needed to protect a legitimate business interest. Courts also test duration, geography and scope, and in some states will refuse to rewrite an overbroad clause — striking it entirely instead.

The consequence for drafting: an aggressive non-compete is often worse than a modest one, because the aggressive version risks total invalidation while the modest one survives.

What to use when a non-compete is not available

In a state that bans them — or for a worker below the threshold — the protection you actually need is usually available another way:

• A strong NDA. Most of what employers fear losing is information: customer lists, pricing, roadmaps, source code. Protect it directly.
• Trade secret law. Trade secrets are protected independently of any contract, provided you took reasonable steps to keep them secret.
• Narrow non-solicitation of customers the person actually dealt with, where the state permits it.
• IP assignment. Ensure work product is owned by the company from the outset, so departure does not put ownership in question.

Practical guidance

If you are the employer: decide what you are really protecting. If it is information, an NDA does the job in every state. Do not paste a non-compete into an offer letter for a California hire — it is unenforceable and it signals that the rest of your paperwork was not checked either.

If you are being asked to sign: read the geography and duration, check whether your state bans non-competes or sets an earnings threshold, and ask whether it is triggered by any departure or only by resignation. Ask for a carve-out for your pre-existing skills and general knowledge. An unenforceable clause can still deter a future employer who does not want the argument, so it is worth negotiating even where it would ultimately fail.

The documents

Our NDA covers one-way or mutual disclosure, the definition of confidential information, permitted use and exclusions, term and return or destruction of materials.

Our employment agreement includes an optional non-compete with state gating built in: choose a governing state that bans them (CA, MN, ND, OK) and the document automatically substitutes a confidentiality and limited non-solicitation clause instead of an unenforceable restriction.

→ Non-Disclosure Agreement (NDA) · Employment Agreement

Hiring a contractor rather than an employee? Independent contractor agreement clauses.