01The 2026 landscape: why the FTC is out of the picture
In April 2024, the Federal Trade Commission finalized a rule banning most post-employment non-competes. On August 20, 2024, the U.S. District Court for the Northern District of Texas vacated the rule with nationwide effect in Ryan, LLC v. FTC. The FTC appealed. Then, on September 5, 2025, the Commission itself voted 3-1 to dismiss the appeal and accede to vacatur. Chair Ferguson's statement called the rule's illegality "patently obvious." The FTC has since stated it will pursue non-compete concerns case-by-case under Section 5 of the FTC Act rather than by rulemaking.
What this means for 2026: there is no federal non-compete rule to comply with. The entire non-compete landscape is state law. Employers drafting employment agreements in 2026 must analyze every restrictive covenant against the law of the state where the employee works, not where the employer is headquartered — and two jurisdictions can yield opposite results from the same form contract. Meanwhile, the DOL issued a Notice of Proposed Rulemaking on February 26, 2026 to rescind the 2024 six-factor independent-contractor rule and reinstate a 2021-style test; the comment period closes April 28, 2026.
02The eight agreement types you actually need
A functioning employment contract suite covers eight documents, each with its own legal framework:
- Offer letter — pre-hire, role, comp, start date, at-will (or WDEA in Montana); in 16 states + DC must include good-faith salary range.
- Employment agreement — full contract with restrictive covenants, IP assignment, confidentiality, dispute resolution.
- Independent contractor agreement — classification-aware; ABC test in CA/MA/NJ/IL, federal economic-reality elsewhere.
- Severance and general release — OWBPA-compliant if age 40+, § 1542 waiver in CA, Silenced No More carve-outs.
- Performance Improvement Plan (PIP) — SMART-goal framework, documented support, consequences.
- Termination letter — state-specific final pay, COBRA, WARN notice.
- Non-solicitation agreement — post-FTC-vacatur alternative in ban states.
- IP assignment — present assignment, prior-inventions schedule, § 2870-type carve-outs in 8 states.
03At-will vs. Montana: the one exception
Every state except Montana defaults to at-will employment — either party can terminate at any time, with or without cause, subject only to anti-discrimination and public-policy limits. Montana's Wrongful Discharge from Employment Act, Mont. Code Ann. §§ 39-2-901 through 39-2-915, replaced the at-will statute in 1987 and remains the only statutory deviation from at-will in the United States.
Under the WDEA, after completion of a probationary period (default 12 months unless otherwise specified in writing at hire), a discharge is wrongful if it was (a) in retaliation for refusing to violate public policy or for reporting a violation, (b) not for good cause, (c) a material violation of the employer's own written personnel policy that deprived the employee of a fair opportunity to remain employed, or (d) — following the 2021 amendment — based solely on the employee's legal expression of free speech, including social media statements. The WDEA is the exclusive remedy and preempts tort and contract claims arising from discharge, with damages capped at four years of wages and fringe benefits (plus punitive damages for fraud or malice in public-policy retaliation cases).
Practical implication: Montana offer letters and employment agreements must identify the probationary period expressly. Boilerplate "at-will" language without the WDEA acknowledgment is not enforceable as written.
04Non-compete: 7 full-ban states, wage thresholds, and what still works
Seven jurisdictions ban post-employment non-competes outright in 2026:
- California — Bus. & Prof. Code § 16600 (since 1872); SB 699 added notice requirements in 2024; H&S Code §§ 1190 et seq. voids noncompetes for PE-acquired physician/dental practices effective Jan 1, 2026.
- Minnesota — Minn. Stat. § 181.988, effective July 1, 2023; void for employees and independent contractors; sale-of-business exception only.
- Montana — Mont. Code Ann. § 28-2-703; void except sale of business or partnership dissolution.
- North Dakota — N.D. Cent. Code § 9-08-06; void since 1865.
- Oklahoma — 15 Okla. Stat. § 217; void except narrow customer-solicitation exception under § 219A.
- Wyoming — Wyo. Stat. § 1-23-108, effective July 1, 2025 (new ban).
- District of Columbia — D.C. Code § 32-581.01; broad prohibition with a narrow carve-out for medical specialists earning at least $250,000.
Washington's ESHB 1155, signed by Governor Ferguson in March 2026, joins this list effective June 30, 2027.
Nine states void non-competes for workers below specified income thresholds, indexed annually. For 2026: Colorado ($127,091 non-compete, $76,255 non-solicit), Illinois ($75,000 non-compete, $45,000 non-solicit), Maine (~$58,575), Maryland (~$46,800 general, $350,000 healthcare), New Hampshire (200% of federal min wage), Oregon (~$113,241 plus post-term garden leave), Rhode Island (250% of federal poverty), Virginia (~$77,133), and Washington (~$120,560 employees, ~$301,399 contractors — then a full ban in June 2027).
Nevada prohibits non-competes for hourly workers. Idaho limits them to key employees. Massachusetts requires garden leave of at least 50% of highest annualized base salary under M.G.L. c. 149 § 24L. Remaining states enforce reasonableness tests. Florida's § 542.335 is the most employer-favorable, presuming reasonableness up to two years.
05Non-solicit and NDA: the post-FTC alternatives, drafted right
In ban states, the replacement is a narrowly drafted non-solicit paired with a DTSA-noticed confidentiality clause. Most ban statutes explicitly preserve these tools: Minnesota's § 181.988 states the ban does not restrict non-solicits, NDAs, or trade-secret agreements. Wyoming permits trade-secret-related non-solicits. California is stricter — under Edwards v. Arthur Andersen (2008) and AMN Healthcare v. Aya Healthcare (2018), employee non-solicits are generally unenforceable as de facto non-competes under § 16600; customer non-solicits survive only when narrowly tied to trade secrets.
Drafting rules for non-solicits that hold up: limit customer non-solicits to customers the specific employee personally serviced or had material personal contact with during the final 12-24 months; limit employee non-solicits to active solicitation (not general hiring) for 12 months; exclude general-circulation job postings, passive recruiting through employment websites, and responses to unsolicited inquiries; pair with a DTSA-noticed confidentiality clause so the Company retains full trade-secret remedies independent of the covenant.
06DTSA § 1833(b) whistleblower notice — non-negotiable
The Defend Trade Secrets Act at 18 U.S.C. § 1833(b) provides whistleblower immunity: an individual is not liable under any trade-secret law for disclosures made in confidence to a government official or attorney solely to report or investigate a suspected violation of law, or in a complaint filed under seal. Section 1833(b)(3) requires employers to include notice of this immunity in any contract with an employee, consultant, or contractor that governs trade-secret or confidential information use.
Failure to include the notice does not invalidate the confidentiality clause — but under § 1833(b)(3)(C), the employer forfeits the right to recover exemplary (double) damages or attorney fees under the DTSA in any enforcement action against the non-noticed employee. Courts have enforced the penalty; see Xoran Holdings LLC v. Luick (E.D. Mich. 2017). Compliance is a single paragraph. Non-compliance costs the DTSA's most valuable remedies.
07Speak Out Act + Silenced No More: the NDA carve-outs
The federal Speak Out Act, Pub. L. 117-224 (December 7, 2022), makes pre-dispute non-disclosure and non-disparagement clauses unenforceable as to claims of sexual assault and sexual harassment. It applies to claims filed after enactment, preserves post-dispute settlement NDAs, and does not restrict trade-secret protection.
Several states extend beyond the federal floor. California's Silenced No More Act (SB 331, effective Jan 1, 2022) voids NDA provisions restricting factual disclosure of any workplace harassment, discrimination, or retaliation under FEHA. Washington's Silenced No More Act (RCW 49.44.211) covers discrimination, harassment, retaliation, and wage theft. Oregon's SB 726 and New Jersey's N.J.S.A. 10:5-12.8 have similar scope. A pre-dispute NDA that only mirrors the federal Speak Out Act's narrower scope is partially void in these states.
Additional required carve-outs in any well-drafted NDA: (a) NLRA § 7 — the NLRB's 2023 McLaren Macomb decision invalidates overbroad confidentiality clauses that chill discussion of wages, hours, or terms of employment; (b) EEOC charge-filing rights (cannot be waived, though monetary recovery can be); (c) SEC whistleblower protections under Dodd-Frank § 21F and 17 C.F.R. § 240.21F-17(a); (d) the EFAA (Ending Forced Arbitration of Sexual Assault and Sexual Harassment Act, 9 U.S.C. §§ 401-402, effective March 3, 2022) carve-out in any arbitration clause.
08IP assignment: § 2870 and its seven siblings
California Labor Code § 2870 limits employee invention assignments: an assignment cannot cover an invention developed entirely on the employee's own time without using the employer's equipment, supplies, facilities, or confidential information, and that either does not relate to the employer's business or did not result from work performed for the employer. § 2872 requires written notice of § 2870 at execution. An assignment missing the notice is unenforceable as to inventions meeting the criteria.
Seven other states have parallel statutes: Delaware (19 Del. C. § 805), Illinois (765 ILCS 1060/2), Kansas (K.S.A. § 44-130), Minnesota (Minn. Stat. § 181.78), North Carolina (N.C. Gen. Stat. § 66-57.1), Utah (Utah Code § 34-39-3), and Washington (RCW 49.44.140). Drafting pattern is identical — insert the statutory carve-out language verbatim and attach a prior-inventions schedule.
Two additional traps: (1) post-employment assignment clauses purporting to cover inventions conceived after separation are void in most jurisdictions as a restraint on future labor; (2) the "work made for hire" doctrine under the Copyright Act applies only to specific categories and scope-of-employment works — an express assignment of all works whether or not qualifying as work-for-hire is still required.
09Independent contractor: ABC vs. economic reality
The federal Fair Labor Standards Act uses the economic-reality test. On February 26, 2026, the DOL issued a Notice of Proposed Rulemaking to rescind the 2024 six-factor rule and reinstate a 2021-style test giving controlling weight to (1) the nature and degree of the hiring party's control and (2) opportunity for profit or loss based on the worker's own initiative or investment. Comment period closes April 28, 2026. Until a final rule issues, the DOL enforces under Fact Sheet 13 and a 2019 opinion letter.
Four states apply the stricter ABC test broadly: California (Labor Code § 2775 codifying Dynamex, with AB 5, AB 2257, and AB 1514's 2026 exemption refinements), Massachusetts, New Jersey, and Illinois. Under the ABC test, a worker is presumed an employee unless all three prongs are satisfied: (A) free from control, (B) work is outside the hiring entity's usual course of business, and (C) the worker is customarily engaged in an independently established trade. Prong B is the usual failure: if a contractor performs work that is part of the hiring entity's core business, the classification fails regardless of control.
Misclassification penalties are severe. California Labor Code § 226.8 imposes civil penalties of $5,000-$25,000 per willful violation, plus PAGA penalties, unpaid wages, overtime, meal-break premiums, employer-side payroll taxes, and workers' comp coverage. An arrangement compliant under federal economic-reality can still fail state ABC — California operates independently.
10Pay transparency + salary history bans (2026)
Sixteen states plus DC have enacted pay transparency laws. Twelve require salary range disclosure in job postings: California (15+ employees; under SB 642 effective Jan 1, 2026, the pay scale must reflect a good-faith estimate of what the employer reasonably expects to pay upon hire — ending broad placeholder ranges), Colorado (1+ employees; benefits disclosure plus internal promotion notification), Hawaii (50+), Illinois (15+; 14-day promotion notice), Maine (effective Jan 1, 2026), Maryland, Massachusetts (25+, effective Oct 29, 2025), Minnesota (30+), New Jersey (10+), New York (4+, the lowest threshold), Vermont (5+), and Washington. Connecticut, Nevada, and Rhode Island require disclosure on request or before an offer. D.C. requires range in postings. Oregon requires detailed payroll explanations at hire effective Jan 1, 2026. Delaware's law takes effect September 2027.
Seventeen states plus DC ban salary history inquiries for private employers: CA, CO, CT, DE, HI, IL, ME, MD, MA, NV, NJ, NY, OR, RI, VT, VA, WA. These apply to the recruiting process regardless of where the company is headquartered — if a role can be filled by someone in a banned jurisdiction, the inquiry is prohibited. Penalties escalate: California $100-$10,000 per violation (each posting separately); Colorado $500-$10,000; Washington enforcement ramped up in 2024-2025.
11Severance and OWBPA: 21/45/7-day discipline
For employees age 40 or older, a severance that releases ADEA claims must comply with the Older Workers Benefit Protection Act, 29 U.S.C. § 626(f) and 29 C.F.R. § 1625.22. The seven requirements:
- Written agreement in plain language
- Specific reference to ADEA rights being waived
- No waiver of claims arising after signing
- Consideration beyond what the employee is already entitled to
- Written advice to consult an attorney
- 21 days (individual) or 45 days (group RIF or exit incentive program) to consider
- 7-day post-signing revocation that cannot be shortened
For group programs, OWBPA Exhibit A is mandatory: the decisional unit, eligibility factors, time limits, and job titles + ages of all individuals eligible or selected, and job titles + ages of all individuals in the same classification who are not eligible or not selected. Without Exhibit A, the ADEA waiver is void. An employer cannot cure a defective waiver by subsequent letter.
Unwaivable rights regardless of OWBPA compliance: unemployment insurance, workers' compensation, vested ERISA benefits, the right to file an EEOC charge, and future claims arising after signing. In California, the § 1542 waiver is required to release unknown claims.
12PIPs and termination: paper trails that hold up
A PIP is a documentation instrument as much as a performance tool. Vague deficiencies ("poor attitude," "not a culture fit") invite later discrimination and retaliation claims treating the PIP as pretext. Each deficiency should tie to a specific, dated incident or measurable metric. Expectations should be SMART — specific, measurable, achievable, relevant, time-bound. Document specific support (training, mentoring, tools, access); a PIP without support is vulnerable. 30-90 days is typical; under 30 days often reads as pretextual.
Termination letters need state-specific final-pay language. Immediate final pay on involuntary termination is required in California (Lab. Code §§ 201-203, waiting-time penalty of 1 day's wages per day of delay capped at 30 days), Colorado, Hawaii, Massachusetts, Minnesota (24 hours on written demand), Missouri, Montana, Nevada, and Utah. Most others default to next regular payday. Accrued vacation is wages in California, Colorado, Illinois, Massachusetts, Montana, Nebraska, North Dakota, and others; use-it-or-lose-it is unlawful in California.
For mass layoffs, federal WARN requires 60 days' notice for 100+ employees; Cal-WARN at 75+; NY WARN at 50+ and requires 90 days. Violation: back pay and benefits for the notice period per affected employee.
13The 2026 compliance checklist
Before any employment agreement goes out in 2026:
- Non-compete: ban state? Threshold met? MA garden leave? WA sunset in June 2027?
- Non-solicit: narrow to material-contact customers + coworked employees; exclude general hiring.
- DTSA § 1833(b): present in every agreement covering trade-secret or confidential information.
- Speak Out Act + state Silenced No More: appropriate carve-outs.
- NLRA § 7 + EEOC + SEC whistleblower: preserved in every NDA and release.
- EFAA: carve-out in every arbitration clause.
- IP assignment: § 2870-type carve-out in CA/DE/IL/KS/MN/NC/UT/WA; prior-inventions schedule.
- At-will: default except Montana (WDEA, identify probationary period).
- Pay transparency: good-faith range in 12+ states; CA SB 642's expected-hire standard.
- Salary history: no inquiries in 17 states + DC.
- IC classification: ABC test in CA/MA/NJ/IL; economic-reality federal.
- OWBPA (age 40+): 21/45-day, 7-day revocation, plain-language waiver, Exhibit A for groups.
- California § 1542 + § 925: statutory recitation + no out-of-state choice of law for CA employees.
- State final-pay + WARN: timing requirements vary materially by jurisdiction.
The free generator below runs all of these checks automatically. Select your agreement type and jurisdiction; it'll draft the document and flag compliance issues live.