Employment Agreement Generator

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 United States District Court for the Northern District of Texas vacated the rule with nationwide effect in Ryan, LLC v. FTC. The FTC appealed, but on September 5, 2025, the Commission itself voted 3-1 to dismiss the appeal and accede to vacatur. 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 in the same form contract.

Separately, 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. Until a final rule issues, the DOL is enforcing under Fact Sheet 13 and a 2019 opinion letter.

02The eight agreement types you actually need

A functioning employment contract suite covers eight distinct documents, each with its own legal framework:

(1) Offer letter. Pre-hire, establishes role, comp, start date, at-will (or WDEA in Montana), and in 16 states + DC must include good-faith salary range disclosure. (2) Employment agreement. Full contract with restrictive covenants, IP assignment, confidentiality, and dispute resolution. (3) Independent contractor agreement. Classification-aware drafting, ABC test compliance in CA/MA/NJ/IL, federal economic-reality test elsewhere. (4) Severance and general release. OWBPA-compliant if the employee is 40 or older, § 1542 waiver in California, Silenced No More carve-outs. (5) Performance Improvement Plan (PIP). SMART-goal framework, documented support, and consequences. (6) Termination letter. State-specific final pay, COBRA, WARN notice. (7) Non-solicitation agreement. The post-FTC-vacatur alternative in ban states. (8) IP assignment. Present assignment, prior-inventions schedule, § 2870-type carve-outs in eight 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 a different period is specified in writing at hire), a discharge is wrongful if it was in retaliation for refusing to violate public policy, was not for good cause, materially violated the employer's own written personnel policy, or — following the 2021 amendment — was based solely on the employee's legal expression of free speech, including statements made on social media. 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 drafting implication: Montana offer letters and employment agreements must identify the probationary period expressly. If a written agreement is silent, the 12-month default applies. A Montana agreement that uses boilerplate "at-will" language without the WDEA acknowledgment is not enforceable as written.

04Non-compete: the 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; Health & Safety Code §§ 1190 et seq. voids noncompetes for private-equity-acquired physician and dental practices effective Jan. 1, 2026), Minnesota (Minn. Stat. § 181.988, effective July 1, 2023 — void for employees and independent contractors), Montana (Mont. Code Ann. § 28-2-703 — void except for 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), and the District of Columbia (Ban on Non-Compete Amendment Act, 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 have wage-threshold rules that void non-competes for workers below specified earnings levels, with thresholds indexed annually: Colorado (C.R.S. § 8-2-113: $127,091 non-compete, $76,255 non-solicit for 2026), Illinois (820 ILCS 90: $75,000 non-compete, $45,000 non-solicit), Maine (26 M.R.S. § 599-A: ~$58,575 for one person), Maryland (~$46,800 general, $350,000 for healthcare), New Hampshire (200% of federal minimum wage), Oregon (ORS § 653.295: ~$113,241 plus post-term garden leave), Rhode Island (250% of federal poverty), Virginia (Va. Code § 40.1-28.7:8: ~$77,133), and Washington (RCW 49.62: ~$120,560 employees, ~$301,399 contractors — and then a full ban arrives 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 (G.L. c. 149 § 24L). Most remaining states enforce non-competes that satisfy a reasonableness test — reasonable in scope, duration, and geography, supported by consideration beyond continued employment, and protecting a legitimate business interest. Florida is the most employer-favorable jurisdiction, with § 542.335 presuming reasonableness up to two years.

05Non-solicit and NDA: the post-FTC alternatives, drafted right

In ban states, the replacement for a non-compete is a carefully drafted non-solicit plus a DTSA-noticed confidentiality clause. Most ban statutes explicitly preserve these tools: Minnesota's § 181.988 states that the ban does not restrict non-solicits, NDAs, or trade-secret agreements. Wyoming's new statute permits non-solicits as to trade-secret protection. California is the stricter exception — 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, and customer non-solicits survive only when narrowly tied to trade secrets.

Drafting rules for non-solicits that hold up: (a) limit customer non-solicits to customers the specific employee personally serviced or had material personal contact with during the final 12-24 months of employment; (b) limit employee non-solicits to active solicitation — not general hiring — for 12 months; (c) exclude general-circulation job postings, passive recruiting through employment websites, and responses to unsolicited inquiries; (d) pair with a DTSA-noticed confidentiality clause so that the Company retains full trade-secret remedies independent of the covenant; (e) avoid "any customer of the Company" or "any employee of the Company" language — courts read this as a non-compete and void it accordingly.

06DTSA § 1833(b) whistleblower notice — non-negotiable

The Defend Trade Secrets Act of 2016 at 18 U.S.C. § 1833(b) provides whistleblower immunity: an individual is not civilly or criminally liable under any federal or state trade secret law for disclosing a trade secret in confidence to a government official or attorney solely for reporting or investigating 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 the use of a trade secret or other confidential information. Failure to provide 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 cheap — a single paragraph. Non-compliance costs the DTSA's most valuable remedies. This tool auto-inserts the notice in every agreement that contains confidentiality provisions.

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. The act applies to federal, state, or tribal claims filed after enactment. It does not invalidate post-dispute settlement NDAs and does not restrict trade-secret or proprietary-information protections.

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) voids NDAs covering 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. In these jurisdictions, a pre-dispute NDA that simply parrots the federal Speak Out Act's narrower scope will be partially void as to state-protected disclosures.

Additional required carve-outs in any well-drafted employment NDA: (a) NLRA § 7 protected concerted activity — 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; (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 actual or demonstrably anticipated research, or did not result from any work performed for the employer. § 2872 requires the employer to provide written notice of § 2870 at execution. An assignment missing the notice is unenforceable as to inventions meeting the statutory criteria.

Seven other states have parallel or similar statutes: Delaware (19 Del. Code § 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). The 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 — attempts to assign 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 only to works created within the scope of employment — 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 for classification. On February 26, 2026, the Department of Labor issued a Notice of Proposed Rulemaking to rescind the 2024 six-factor balancing rule and reinstate a 2021-style test giving controlling weight to (1) the nature and degree of the hiring party's control over the work and (2) the worker's opportunity for profit or loss based on the worker's own initiative or investment. The 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 most commonly failed: if a contractor performs work that is part of the hiring entity's core business, the classification fails regardless of the other prongs. A software company that engages a plumber passes prong B; a software company that engages a software engineer as a contractor does not.

Misclassification penalties can be severe. In 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' compensation coverage. An arrangement can be compliant under the federal economic-reality test and still fail state ABC — California operates independently of federal rules.

10Pay transparency + salary history bans (2026)

Sixteen states plus the District of Columbia 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), Colorado (1+ employees; requires benefits disclosure and 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 salary range in postings. Oregon requires detailed payroll explanations at hire effective Jan. 1, 2026. Delaware's law takes effect September 2027.

Seventeen states plus D.C. 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 bans apply to the employer's 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 civil penalties run $100-$10,000 per violation, each posting counting separately. Colorado fines are $500-$10,000. Washington has ramped up investigations since 2024. The practical compliance baseline: publish a good-faith range reflecting actual expected hire compensation, exclude all salary history questions from applications and interviews, and retain records of pay-range determinations.

11Severance and OWBPA: 21/45/7-day discipline

For employees age 40 or older, a severance agreement 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: (1) written agreement in plain language; (2) specific reference to ADEA rights being waived; (3) no waiver of claims arising after signing; (4) consideration beyond what the employee is already entitled to; (5) written advice to consult an attorney; (6) consideration period of at least 21 days for an individual offer, 45 days for a group reduction-in-force or exit incentive program; (7) 7-day post-signing revocation that cannot be shortened by agreement.

For group programs, the OWBPA Exhibit A disclosure is mandatory: the employer must provide a chart showing (a) the decisional unit — the class, unit, or group considered for the program; (b) eligibility factors; (c) time limits; and (d) job titles and ages of all individuals eligible or selected, and job titles and ages of all individuals in the same job classification or organizational unit who are not eligible or not selected. Without Exhibit A, the ADEA waiver is void. An employer cannot cure a defective waiver by issuing a subsequent letter.

Unwaivable rights regardless of OWBPA compliance: unemployment insurance, workers' compensation, vested benefits under any ERISA plan, the right to file an EEOC charge (though monetary recovery can be waived), and future claims arising after signing. In California, the § 1542 waiver is essential to release unknown claims; in most other states, standard general-release language covers unknown claims without a specific statutory reference.

12PIPs and termination: paper trails that hold up

A Performance Improvement Plan is a documentation instrument as much as a performance tool. Vague deficiencies ("poor attitude," "not a culture fit") invite later discrimination and retaliation claims that treat the PIP as pretext. Each deficiency should tie to a specific, dated incident or measurable performance metric. Expectations should be SMART — specific, measurable, achievable, relevant, time-bound. The employer should document specific support being provided (training, mentoring, tools, access); a PIP that sets expectations without support is more vulnerable. 30-90 days is typical; durations under 30 days often read as pretextual.

Termination letters need state-specific final-pay language. Immediate final pay on involuntary termination is required in California (Lab. Code §§ 201-203 — with waiting-time penalties of one day's wages per day of delay, capped at 30 days), Colorado (immediate involuntary, next payday voluntary), Hawaii, Massachusetts, Minnesota (24 hours on written demand), Missouri, Montana (immediately for cause), Nevada, and Utah. Most other states default to the next regularly scheduled payday. Accrued vacation or PTO must be paid out as wages in California, Colorado, Illinois, Massachusetts, Montana, Nebraska, North Dakota, and several others; "use-it-or-lose-it" policies are unlawful in California.

For mass layoffs, the federal WARN Act requires 60 days' notice for employers with 100+ employees; Cal-WARN triggers at 75+ employees; NY WARN triggers at 50+ employees and requires 90 days' notice. 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: is the state a ban state? Is compensation above the threshold? Is MA garden leave included? Is WA getting its non-compete ban in June 2027? The federal FTC rule is dead — every analysis is state law now.
• Non-solicit: narrow to customers with material personal contact, employees with whom Employee worked; exclude general hiring, passive recruiting, unsolicited inquiries.
• DTSA § 1833(b) notice: present in every agreement governing trade-secret or confidential information use. Without it, exemplary damages and attorney fees are forfeited.
• Speak Out Act + state Silenced No More: carve-outs for sexual harassment/assault (federal) and, in CA/WA/OR/NJ, all workplace harassment/discrimination/retaliation.
• NLRA § 7 + EEOC + SEC whistleblower: expressly preserved in every NDA and release.
• EFAA: carve-out in every arbitration clause for sexual harassment/assault disputes.
• IP assignment: § 2870-type carve-out in CA/DE/IL/KS/MN/NC/UT/WA; prior-inventions schedule in all states.
• At-will: default in 49 states + DC. Montana WDEA only — identify probationary period and good-cause standard.
• Pay transparency: good-faith range in 12+ states; CA SB 642 (2026) requires the range to reflect expected hire compensation.
• Salary history: no inquiries in 17 states + DC.
• IC classification: ABC test in CA/MA/NJ/IL — prong B is the usual failure; economic-reality test federally (watch the DOL NPRM closing April 28, 2026).
• OWBPA (age 40+): 21 days individual / 45 days group, 7-day revocation, plain-language ADEA waiver, advice-of-counsel notice, group Exhibit A.
• California § 1542 waiver: releases of unknown claims require the statutory recitation.
• California § 925: no out-of-state choice of law or venue for CA employees unless counsel-represented in negotiation.
• State final-pay timing: immediate or next-payday, with waiting-time penalties in CA.
• WARN: 60 days federal, 75+/75 days CA, 50+/90 days NY for mass layoffs.