Remote workers, noncompetes and the new choice-of-law battlefield

The U.S. Bureau of Labor Statistics (BLS) recently reported that approximately 22.6% of the total U.S. labor force now works remotely. Half of the remote employees work in technology, finance or the professional services industry, with advanced degree holders representing approximately two out of five remote workers.

Remote work has turned a once-reasonable limit on competitive business practices into a national choice-of-law problem, forcing employers and employees to ask which state's rules should govern a restrictive employment covenant.

Before remote work became popular, noncompete agreements usually centered on familiar, concrete facts: where the employer operated, where the employee worked, which customers the employee served and whether the restriction was reasonable in time and territory. Today, those facts are harder to pin down.

A software engineer may live in California, report to managers in Massachusetts, serve customers in New York and sign an agreement selecting Delaware law. A sales executive may work from home outside a restricted territory while maintaining relationships with customers inside it. These arrangements have made noncompete agreements more difficult to draft, enforce and challenge.

Nationwide, the legal landscape is becoming increasingly fragmented. In April 2024, the Federal Trade Commission (FTC) adopted a rule prohibiting nearly all employee noncompete agreements. However, district courts in Texas and Florida enjoined implementing the FTC rule, and the commission has since withdrawn the ban on noncompete agreements, leaving state law as the primary source of authority. U.S. Bureau of Labor Statistics, TED: The Economics Daily (April 18, 2026). As a result, employers and employees remain subject to a patchwork of state rules that range from near-total bans to reasonableness-based enforcement. For a remote workforce distributed across state lines, the practical challenge is no longer determining whether a noncompete is reasonable; it is also deciding which state gets to answer that question.

The traditional framework

A noncompete agreement is a post-employment restriction that limits a former employee's ability to work for a competitor, start a competing business or engage in defined competitive activity for a period of time. In states that permit them, courts typically ask whether the covenant protects a legitimate business interest and whether it is reasonable in duration, geographic reach and scope of restricted activity. Legitimate interests often include trade secrets, confidential information, customer goodwill, specialized training and other competitive assets developed through the employment relationship. See Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937 discussion generally regarding the common law reasonableness standard and its application under California law.

Noncompete agreements protect proprietary information and encourage employers to invest in training and innovation, which helps match employers with workers seeking long-term roles. But noncompete agreements can weaken employee bargaining power, delay workers from taking comparable jobs, reduce competition and chill innovation, especially when imposed on employees who never had access to meaningful trade secrets. The modern policy debate is therefore not simply whether employers deserve protection, but whether the employee is key to the business. See Georgia's Restrictive Covenant Act, O.C.G.A. § 13-8-50, et seq., which governs the enforceability of restrictive covenants in employment agreements and identifies the factors defining a "key" employee.   

The state law patchwork

The differences among states are significant. Some states ban employment noncompetes almost entirely. California, Minnesota, Oklahoma and North Dakota generally prohibit employee noncompete agreements, with narrow exceptions such as covenants connected to the sale of a business. California is the most prominent example. Business and Professions Code (BPC) section 16600 declares that a contract restraining a person "from engaging in a lawful profession, trade, or business" is void, subject to statutory exceptions. Section 16600.5 goes further by providing that a void contract" is unenforceable regardless of where and when the contract was signed," and that an employer commits a civil violation by entering into or attempting to enforce such a contract. The employee may seek an injunction, actual damages and mandatory attorneys' fees and costs should they prevail.

Other states take a more calibrated approach, regulating noncompetes by employee category, compensation level, notice requirements or industry. Some restrict noncompetes for lower-wage workers while preserving them for highly compensated employees or key personnel. Georgia, for example, permits restrictive covenants for certain employees when the restraint is reasonable in time, geographic area and scope of prohibited activities. Other states, including Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Nevada, Virginia, Washington and the District of Columbia, have adopted wage thresholds or other limitations. Several states have also considered or adopted industry-specific restrictions, particularly in healthcare.

New York illustrates the uncertainty in many jurisdictions. Although lawmakers have considered legislation that would significantly restrict noncompete agreements, the 2026 legislative session concluded without passage of a statewide ban. As a result, New York continues to rely on common law principles, generally enforcing noncompete agreements only when they are reasonable, necessary to protect legitimate business interests, not harmful to the public and not unduly burdensome to the employee.

Choice of law and forum selection

Since state rules differ so dramatically, choice-of-law and forum-selection clauses have become central to noncompete litigation. A choice-of-law clause identifies the law that will govern the dispute. A forum-selection clause identifies where the dispute will be heard. In ordinary commercial contracts, courts often honor these provisions. Employment noncompetes are different because they implicate strong public policies about worker mobility, local labor markets and competition.

Resolving choice-of-law issues requires a review of the parties' intent and analysis of the state's public policy interests. Did the parties choose a particular state's law? Does that state have a meaningful connection to the parties or the employment relationship? Would applying that law undermine a fundamental policy of another state with a stronger interest? Where was the contract executed? Where did the employee perform the work? Where did the alleged breach occur? Where would the harm be felt? If there is no effective choice of law, courts often apply the law of the state with the most significant relationship to the parties and the dispute. See DraftKings v. Michael Hermalyn, 118 F.4th 416 (1st Cir. 2024).

California adds another layer. Labor Code section 925 restricts employers from requiring California-based employees to litigate outside California or under another state's law, unless the employee was "individually represented by counsel in negotiating" the agreement. BPC section 16600.5 adds a more direct anti-enforcement rule for restraints that are void under California law. These provisions make California a powerful forum for employees seeking declaratory relief, but they do not automatically bind courts in other states. Out-of-state courts may apply their own conflict-of-law rules and may decline to let California dictate the result.

Remote work complicates the analysis

Remote work blurs the geographic assumptions built into traditional noncompete law. A territory listed in an agreement may no longer correspond to where the employee physically works. A remote employee may sit inside a restricted state while serving customers elsewhere or may reside outside the territory while competing for customers inside it. Courts and litigants must therefore distinguish physical presence from competitive activity. The relevant question is not simply where the employee opened a laptop, but where the employer's protected interests, customers, confidential information and alleged competitive injury are located.

This uncertainty can encourage forum races. An employee may first file in California seeking a declaration that the noncompete is void. An employer may file first elsewhere, seeking enforcement under a more favorable state's law. The first-filed action often shapes the litigation strategy, even if it does not determine the ultimate law. For employers with remote workforces, the practical takeaway is clear: A single national agreement can create inconsistent risks depending on where each employee lives, works, sells and later competes.

Practical guidance for employers and employees

Employers should be cautious about treating noncompetes as default documents. Each restriction should be tailored to the employee's role, access to protectable information, compensation, state of residence, customer contacts and actual competitive risk. Employers should also revisit choice-of-law and forum-selection provisions for remote employees and confirm that they are consistent with each worker's location and applicable state statutes. Where the main concern is confidential information, a nondisclosure agreement, invention-assignment agreement, trade-secret policy or customer nonsolicitation clause may provide more targeted protection with less enforcement risk.

Employees should likewise understand that the enforceability of a noncompete may depend on more than the text of the agreement. Their residence, work location, customer base, employer's location, legal representation during negotiation and timing of any lawsuit are all factors. A clause that appears enforceable under one state's law may be void under another. Conversely, a California-based argument may not prevail in a court sitting elsewhere. Because the analysis varies by jurisdiction and the facts of each employment relationship, early legal review is especially important before resigning, joining a competitor, soliciting customers or filing a declaratory relief action.

The role of early alternate dispute resolution (ADR)
Given the legal uncertainty and the potential for costly forum races, early mediation is a vital tool for reaching practical business solutions before litigation costs escalate. Mediation allows parties to move beyond "all-or-nothing" legal arguments and focus on business interests, such as protecting specific customer relationships or proprietary data, without the scorched-earth expense of multi-jurisdictional litigation.

When these disputes are subject to arbitration, parties may benefit from a more streamlined process and a private forum. However, they must remain mindful that arbitration clauses are also subject to choice-of-law challenges; for instance, California's anti-forum-selection rules may still impact where arbitration can be held or which law an arbitrator must apply. See Siert v. Spiffy Franchising, LLC, 758 F. Supp.3d 1142 (N.D. Cal. 2024). By utilizing alternatives to lengthy fact intensive trials, parties can resolve the "choice-of-law" deadlock through a negotiated agreement rather than leaving their fate to a court's interpretation of which state has the "most significant relationship" to the dispute. This proactive approach transforms a high-stakes legal battle into a manageable business transition.

The path forward

The future of noncompete enforcement will be shaped less by a single national rule than by the interaction of remote work, state policy and the conflict-of-law doctrine. With the federal rule off the table, employers and employees must navigate a state-by-state regime in which the same agreement can be valid in one jurisdiction and void in another. Remote work magnifies that problem by separating the employee's physical location from the employer's market and the site of alleged competitive harm. The safest approach is precision: Draft narrowly, review frequently, use less-restrictive tools when possible and assume that choice-of-law and forum-selection clauses will be tested, not simply accepted. In the remote-work era, noncompete disputes are no longer just about competition. They are about which state gets to define fair competition in the first place.

Disclaimer: The content is intended for general informational purposes only and should not be construed as legal advice. If you require legal or professional advice, please contact an attorney.