Guide

Non-Compete Agreements Worldwide — Enforceability by Country

Key Takeaway

Non-compete enforceability generally tracks the broader employment protection landscape — high-EPL countries like Germany require employer compensation during restriction periods, while low-EPL markets like the US are more permissive at the federal level, though state-level restrictions are growing rapidly — the FTC estimated some 30 million US workers were bound by non-competes before its 2024 rule.

Non-Competes and Employment Protection: A Connected Landscape

The OECD Employment Protection Legislation (EPL) database does not directly score non-compete agreements — they are post-employment restrictions, not rules governing the dismissal of workers. However, non-compete enforceability is closely linked to the broader employment protection landscape that EPL measures.

Countries where legislators and courts view the employment relationship as one requiring active legal protection of workers tend to apply the same philosophy to post-employment restrictions. If a country requires employers to justify dismissals and provide substantial severance, it is likely to also scrutinize agreements that continue to restrict the worker after the relationship has ended. The reverse is also broadly true: countries with minimal employment protections tend to give employers more latitude to enforce non-competes.

Understanding where a country sits on the EPL spectrum provides a useful starting point for assessing the likely enforceability of non-compete agreements — though local legal advice remains essential before drafting or relying on any such clause.

High-EPL Countries: Worker-Protective Non-Compete Regimes

Germany

Germany (regular employment EPL: 2.98/6) has one of the most structured non-compete frameworks in the world. Post-contractual non-compete clauses are governed by Sections 74–75 of the German Commercial Code (HGB). A non-compete is only enforceable if:

  • It is in writing and signed by the employer
  • The employer commits to paying compensation of at least 50% of the employee's last contractual remuneration for each year of the restriction
  • The restriction does not exceed two years in duration
  • The employer has a legitimate business interest in the restriction

Non-competes without the compensation commitment are unenforceable. Employers can waive the restriction before it begins, ending both the restriction and the compensation obligation. This framework reflects Germany's broader legal philosophy that the employment relationship must not leave workers economically stranded.

France

France (overall EPL: 2.82/6) similarly requires financial compensation for enforceable non-compete clauses. Under French employment law and collective bargaining agreements, a post-employment non-compete clause must include compensation — typically 30–50% of the average monthly salary during the restriction period, though sector collective agreements may set higher minimums. Courts will void clauses without adequate compensation. Geographic and professional scope must be reasonable.

Portugal

Portugal (overall EPL: 3.18/6) requires compensation for non-compete restrictions. The Labour Code limits non-competes to a maximum of two years for most workers (three years for management personnel and those with access to trade secrets) and requires payment during the restriction period.

Low-EPL Countries: More Employer-Permissive, but Shifting

United Kingdom

The UK (overall EPL: 1.59/6) allows non-compete agreements but applies a reasonableness test. English courts will enforce a non-compete only if it protects a legitimate business interest (such as trade secrets or customer relationships) and is no wider than reasonably necessary. Courts regularly reduce or void overly broad clauses. Unlike Germany and France, UK law does not require financial compensation for the restriction period, though this may change — a UK government consultation in 2023 explored requiring compensation for non-competes.

United States

The US (regular employment EPL: 0.09/6) presents the most complex non-compete landscape of any major economy — not because federal law is strict, but because non-compete enforceability is governed entirely by state law, producing 50 different regimes.

States occupy a spectrum from near-total bans to permissive enforcement:

  • Near-ban states: California, North Dakota, Oklahoma, and Minnesota have statutory bans on employee non-competes for most workers
  • Significant restrictions: Colorado, Illinois, Maryland, Nevada, Oregon, and Washington restrict non-competes to higher-earning employees or impose strict duration and scope limits
  • Traditional enforcement: States like New York, Texas, and Florida historically applied reasonableness tests and enforced well-drafted agreements, though New York courts have generally been skeptical of broad restrictions

The FTC attempted to resolve this patchwork with a 2024 federal rule banning most non-competes, but federal courts blocked the rule before it took effect. Non-compete law in the US remains state-specific as of 2025.

The EU does not have a single directive governing non-compete agreements in employment, leaving member states to regulate them under national law. However, several EU-level developments affect the landscape:

The 2019 Directive on Transparent and Predictable Working Conditions (EU 2019/1152) addresses some aspects of employment terms but does not specifically govern post-employment restrictions. The 2023 EU Artificial Intelligence Act and related data governance frameworks have sparked discussion about whether restrictions on workers moving between AI firms could harm innovation — a debate that may eventually influence how member states treat non-competes in technology sectors.

In practice, EU member states with high EPL scores — Germany, France, Portugal, Belgium, Luxembourg — all have compensation requirements for non-competes. Member states with lower EPL scores, such as Denmark and the Netherlands, have moved toward requiring compensation as well in recent reforms. The direction of travel across Europe is toward greater worker protection post-employment, consistent with the broader employment protection trend.

Asia-Pacific and Other Markets

Non-compete practices in Asia-Pacific vary widely and often depend on sector and seniority rather than comprehensive statutory frameworks:

  • Japan: Non-competes are enforceable but courts scrutinize scope, duration, and compensation carefully. Restrictions on ordinary employees are often voided; restrictions on executives and R&D staff in sensitive roles are more frequently upheld.
  • Australia: Courts apply a reasonableness test similar to the UK. Garden leave clauses — paying employees to stay away during notice periods — are common as an alternative to post-employment non-competes.
  • Singapore: Non-competes are enforced when reasonable in scope. Singapore courts balance employer interests against the public interest in labour mobility in a small market.

Garden Leave as an Alternative

Garden leave — a period during which an employee is paid their full salary but required to stay away from work and competitors — is a widely used alternative or complement to post-employment non-competes, particularly in the UK and Australia. Because the employee remains employed and paid during garden leave, it avoids the compensation requirement debates that arise with non-competes. However, it is only useful when the employer can afford to pay full salary for the restriction period and when keeping the employee away from the business is more important than their active contribution.

Germany Non-compete compensation required by law France 30–50% salary during restriction period United States State-by-state variation — view overall EPL

Frequently Asked Questions

Are non-compete agreements legal everywhere?

Non-compete agreements are legal in most countries, but enforceability varies enormously. In some jurisdictions they are routinely enforced by courts. In others, courts scrutinize them closely and will strike them down if they are too broad in scope, geography, or duration. A handful of jurisdictions effectively ban them for most workers — California (US) is the most prominent example, voiding non-competes for virtually all employees by statute.

Why do high-EPL countries tend to restrict non-competes more than low-EPL countries?

The correlation is not mechanical, but the underlying legal philosophy is similar. Countries with high OECD EPL scores — like Germany, France, and Portugal — have legal traditions that view the employment relationship as one where the law actively protects the weaker party (the worker). This same tradition extends to post-employment restrictions: courts and legislators in these countries scrutinize anything that limits a worker's ability to earn a living after leaving, requiring that non-competes be narrowly scoped and often requiring compensation during the restriction period.

What did the US FTC attempt to do regarding non-competes?

In April 2024, the US Federal Trade Commission issued a rule that would have banned most non-compete agreements for US workers. The rule was challenged in federal court and was blocked by a federal district court in Texas before it took effect. As of 2025, the FTC rule has not been enforced at the federal level, leaving non-compete enforceability governed by state law in the United States, which varies significantly by state.

What compensation is typically required for non-competes in Germany?

Under German law, a post-contractual non-compete clause is only enforceable if the employer agrees to pay compensation of at least 50% of the employee's last contractual remuneration for each year of the restriction period. A non-compete without this compensation provision is typically unenforceable. The employer can also release the employee from the restriction before it begins, avoiding the obligation to pay compensation. This framework is one of the most employee-protective in the world.

Which US states have banned or significantly restricted non-competes?

California, North Dakota, Oklahoma, and Minnesota have statutory bans or near-bans on non-compete agreements for employees. Several other states — including Colorado, Illinois, Maryland, Nevada, Oregon, and Washington — have enacted significant restrictions, such as prohibiting non-competes for workers below an income threshold or limiting their duration. The trend in US state legislatures since 2020 has been broadly toward restricting non-compete enforceability.

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