Non-Compete Agreements in North Dakota: Generally Void

North Dakota's Statutory Ban

North Dakota is one of only a handful of states that broadly prohibit non-compete agreements. N.D.C.C. Section 9-08-06 provides that every contract by which anyone is restrained from exercising a lawful profession, trade, or business is void to that extent.

The Scope of the Ban

The statute is sweeping. Unlike states that evaluate non-competes on a case-by-case reasonableness basis, North Dakota declares these restrictions void as a matter of law. An employer cannot require an employee to agree not to compete after leaving, regardless of:

• The employee's level of seniority
• Access to trade secrets
• Duration or geographic scope
• The amount of consideration provided

Narrow Exceptions

N.D.C.C. Section 9-08-06 does allow limited exceptions:

• Sale of a business: A person who sells the goodwill of a business may agree not to compete in a similar business within a reasonable geographic area, as long as the buyer continues to operate the business
• Dissolution of a partnership: Partners may agree not to compete in a similar business within a reasonable area

These exceptions apply to business transactions, not to employment relationships. An employment non-compete does not fall within either exception.

What Remains Enforceable

While non-competes are void, employers can still protect their interests through:

• Non-disclosure agreements: Protecting trade secrets and confidential information remains enforceable
• Non-solicitation agreements: Restrictions on soliciting clients or employees may be enforceable if they are reasonable and do not function as a de facto non-compete
• Trade secret protections: Under the North Dakota Uniform Trade Secrets Act

However, courts will examine whether a "non-solicitation" or "NDA" is actually a non-compete in disguise.

Red Flags

• Any employment non-compete, regardless of how it is labeled
• "Non-solicitation" clauses that are so broad they effectively prevent competitive employment
• Employer threatening legal action based on an employment non-compete
• Choice-of-law provisions specifying a state other than North Dakota

When to Consult a Lawyer

Consider consulting a North Dakota attorney if your employer is attempting to enforce a non-compete, if you signed a non-compete and want to confirm it is void, or if you are unsure whether your restrictive covenant qualifies as a non-compete or a permissible non-solicitation agreement.

This article is for informational purposes only and does not constitute legal advice. Consult a licensed attorney for guidance specific to your situation.