Every producer and account executive in insurance has signed something. An employment agreement, an offer letter with an exhibit stapled to the back, a producer agreement handed over on day one with a smile and a pen. Most signed it without reading it closely. Almost none of them know whether it would actually hold up if they tried to leave.
This article is the conversation I have with candidates every single week, written down. What these agreements actually are, when they are enforceable, which states protect you, which states protect your employer, and what has changed in the last few years, because a lot has changed.
The standard disclaimer applies and it is not boilerplate here, it matters. I am not a lawyer and this is not legal advice. Restrictive covenant law is genuinely state specific, fact specific, and changing fast. If you are contemplating a move and you have paper, the single best money you will ever spend is an hour with an employment attorney in your state. What this article will do is make you dangerous enough to know what questions to ask.
Noncompete Versus Restrictive Covenant: Getting the Language Right
People use these terms interchangeably and they should not, because the difference is where most producers get surprised.
Restrictive covenant is the umbrella term. It covers any contractual promise that restricts what you can do during or after your employment. Under that umbrella live several distinct animals.
A noncompete is the broadest and most aggressive. It says you cannot work for a competitor, or in the industry, typically within a defined geography and for a defined time period. This is the one that says you cannot take a producer job at the brokerage across town for two years.
A non-solicitation agreement is narrower and far more common in our business. It does not stop you from working for a competitor. It stops you from soliciting your former clients, prospects, or coworkers after you leave. For a producer with a book, this is usually the clause that actually matters. Plenty of producers who think they have a noncompete problem actually have a nonsolicit problem, and plenty who celebrate that their state banned noncompetes do not realize their nonsolicit is still fully enforceable.
A nondisclosure agreement restricts what information you can take or use, client lists, pricing, carrier arrangements, expiration dates. These are enforceable almost everywhere and they sit on top of trade secret statutes that exist independent of any contract.
Here is why the distinction matters so much in practice. In Oklahoma, where noncompetes are banned, you can leave a firm and open a competing shop across the street. You just cannot call your old clients and ask them to follow you. The noncompete is void. The nonsolicit survives. If you are a producer, that distinction is your entire career.
When Is Any of This Enforceable
Even in states that allow restrictive covenants, courts do not just rubber stamp them. Several requirements have to be met, and this is where the thing you heard about money comes in.
First, the agreement has to protect a legitimate business interest. Client relationships, trade secrets, confidential information, specialized training the firm paid for. Simply not wanting competition is not a legitimate interest anywhere.
Second, it has to be reasonable in duration, geography, and scope. One year or less is the practical default for a defensible covenant in most states, with two years being the outer edge that invites litigation. A five year nationwide restriction on a mid level AE is getting struck down or rewritten almost everywhere.
Third, and this is the one that surprises people, the agreement needs consideration. This is the legal term for the money question. A contract requires something of value flowing in both directions. Your promise not to compete has to be paid for with something.
When you sign at the time of hire, the job itself is the consideration in almost every state. That agreement you signed on day one is generally supported.
The fight happens when an employer hands you a noncompete after you are already employed. Midstream, as the lawyers call it. And here the states split hard. Courts in North Carolina, Montana, South Carolina, Oregon, Texas, Washington, and Wyoming have expressly held that continued employment alone is not sufficient consideration for a noncompete signed mid employment. Something additional has to change hands, a raise, a promotion, a bonus, a change in duties. Illinois and Pennsylvania are among the strictest on this point, with the Pennsylvania Supreme Court holding in Socko v. Mid-Atlantic Systems that a mid employment noncompete requires a promotion, bonus, raise, or other tangible benefit beyond simply keeping your job. Illinois case law, starting with Fifield v. Premier Dealer Services in 2013, went so far as to suggest that absent other consideration, at least two years of continued employment are required to make the covenant stick.
So yes, the money question is real. If your firm slid a noncompete across the desk three years into your employment with nothing attached to it, no bonus, no raise, no promotion, there is a meaningful chance it is unenforceable depending on your state. The majority of states do still permit continued employment alone to serve as consideration, but in at least twelve states some form of additional consideration is required, and in at least six more the law is unclear. The amounts do not have to be large. In North Carolina, a one time payment of $500 has been deemed sufficient. But zero is zero, and zero loses.
The State Landscape: The Extremes, the Near Extremes, and the Middle
The single most important fact about noncompete law in America is that it is state law. There is no federal rule, and after the FTC saga we will get to shortly, there will not be one anytime soon. Where you sit determines what your paper is worth. Here is the landscape as of mid 2026, from most protective of the employee to most protective of the employer.
The full ban states. Five states currently treat virtually all employee noncompetes as void: California, Minnesota, North Dakota, Oklahoma, and Montana. If you had to force rank them, California stands alone at the top. Its 2024 amendments added affirmative employer obligations, including proactive written notice to current and former employees that their noncompetes are void, statutory damages, and attorney's fees for workers who win challenges. In California, a former employer who threatens enforcement risks paying the worker's lawyer. Minnesota is next, having banned every employment noncompete signed after July 1, 2023, with no executive carve out, no income threshold, and no exceptions for key employees, though the law is not retroactive, so pre 2023 agreements remain valid. Then Oklahoma, North Dakota, and Montana, whose bans are old and solid but purely defensive. Critical caveat for producers in all five: nonsolicits and NDAs generally survive. Oklahoma explicitly permits employers to restrict former employees from soliciting established clients.
The sixth member is already scheduled. Washington's near total ban takes effect June 30, 2027, and until then it operates as one of the strictest threshold states in the country.
The threshold states, the mid extreme on the protective side. Thirteen states plus DC now allow noncompetes only above a wage threshold or with other conditions. The notable ones for insurance professionals: Colorado, where noncompetes are barred for workers making below $130,014 as of 2026, Oregon at $119,541 for 2026, where the employer must also demonstrate a protectable interest even against high earners, Illinois at $75,000 under its Freedom to Work Act, with a separate ban on nonsolicits for workers earning $45,000 or less, and Massachusetts, which requires garden leave or other mutually agreed consideration and caps duration at twelve months. Tennessee joins the club this month with a $70,000 threshold effective July 1, 2026, voiding prior agreements below that line. For most producing roles in insurance, note the honest catch: a producer earning $200,000 is above every one of these thresholds. The threshold states protect your CSRs and junior account managers far more than they protect you.
The middle. Roughly twenty five to thirty states sit in a band where noncompetes are enforceable if reasonable, judged under common law or moderate statutes. Alabama, Georgia, Ohio, Michigan, Wisconsin, Missouri, Indiana, Iowa, Kansas, the Carolinas, Virginia, Arizona, and most of the Mountain West and South live here. Within this band the differences are real but incremental, which states blue pencil overbroad agreements versus void them entirely, which require additional consideration midstream, how skeptical the judges are. Force ranking inside this cluster is false precision. What actually matters in a middle state is the specific language of your agreement and the specific facts of your departure.
The enforcement friendly extreme. The two states most likely to enforce a noncompete are Florida and Texas. And Florida just lapped the field. Its CHOICE Act, effective July 1, 2025, lets employers write enforceable covenants and garden leave agreements up to four years for high earners, the most employer friendly framework in the country. Read that again. Four years. While most of the country spent the last five years restricting these agreements, Florida built employers a fortress. If you are a producer in Tampa or Miami with new paper signed after July 2025, treat it as deadly serious. Texas rounds out the bottom, where noncompetes are enforceable when ancillary to an otherwise enforceable agreement, and courts routinely reform overbroad covenants rather than voiding them, which means employers get a free redraft from the judge. Kansas also moved in the employer friendly direction in 2025, making employee and customer nonsolicits presumptively enforceable.
The Federal Story: The Ban That Died
Now the update everyone asks about. In April 2024 the FTC issued a rule that would have banned nearly all employee noncompetes nationwide, retroactively wiping out an estimated 30 million agreements. It never took effect. A federal court in Texas enjoined it in August 2024 in Ryan, LLC v. FTC, finding the Commission exceeded its authority, and entered final judgment on September 4, 2024. On September 5, 2025, the FTC voted 3 to 1 to dismiss its appeals in both Ryan and the companion Eleventh Circuit case and accede to the vacatur of the rule. In early 2026, following a January public workshop, the FTC formally confirmed it will not pursue a categorical national rule and removed the rule from the federal regulations.
The federal ban is dead. But the story has a second act worth knowing. The FTC retains authority under Section 5 of the FTC Act to challenge specific noncompete agreements case by case, particularly those involving lower level employees or agreements that appear exceptionally broad. In late 2025 it forced a large pet cremation company to release 1,800 employees from noncompetes it deemed anticompetitive. So a firm that makes its receptionists sign the same noncompete as its senior producers is now a federal target. But for the individually negotiated agreements that cover producers and AEs, the bottom line is simple: noncompete law is, and will remain, state law.
What This Means for You
If you are a producer or account executive thinking about a move, here is the practical sequence. Find your paper and actually read it. Figure out whether what you have is a noncompete, a nonsolicit, or both, because the answer changes everything about how a transition gets planned. Check your state against the landscape above, and check when you signed and what you received for signing, because the consideration question alone voids more agreements than people realize. Then, before you do anything else, spend the hour with an employment attorney. Every clean transition I have ever managed started with that hour. Every ugly one skipped it.
And know this: an enforceable covenant does not mean you are stuck. It means the move has to be planned properly, with the right sequencing, the right communication, and sometimes the right negotiation with the new firm, many of which will indemnify or buy out paper for the right producer. That is a normal part of how this market works, and it is a conversation I have with candidates and hiring firms constantly.
If you are a firm leader, the lesson runs the other direction. The legal ground under these agreements has shifted more in the last five years than in the previous fifty, and it is still moving. If your producer agreements were drafted a decade ago, if you hand the same covenant to every employee regardless of role, or if you have never confirmed your midstream agreements were supported by real consideration, your protection may be thinner than you think. And if your retention strategy is the paper rather than the platform, the paper will not save you anyway.
I sit in the middle of these conversations every week, on both sides. If you are a producer or AE trying to understand what your agreement actually means for your next move, or a firm leader trying to build a team in a way that survives this landscape, reach out. The number is below.
Bror David Johnson
Founder & Executive Recruiter, Retention Search
773-573-5942 | bdjohnson@retentionsearch.com | www.retentionsearch.com
This article is for general educational purposes only and does not constitute legal advice. Restrictive covenant law varies significantly by state and changes frequently. Consult a qualified employment attorney in your state before making any decisions related to a restrictive covenant or employment agreement.