Jessica JohnsonNon-compete agreements are standard practice across most of the United States — but in North Dakota, they are void by statute. Not void if unreasonable, not void unless you prove hardship, not subject to judicial rewriting: void. This makes North Dakota one of the most employee-friendly states in the country for post-employment mobility, and one of the most challenging states for businesses trying to protect proprietary client relationships and institutional knowledge. Understanding exactly what the law prohibits, what narrow exceptions survive, and what tools employers can legally use instead is essential for every HR department and employment lawyer operating in the state.
What NDCC § 9-08-06 Actually Prohibits
North Dakota Century Code § 9-08-06 is blunt: "Every contract by which anyone is restrained from exercising a lawful profession, trade, or business of any kind is to that extent void." The operative phrase is "lawful profession, trade, or business of any kind." North Dakota courts have interpreted this broadly to cover any post-employment restriction that limits where, for whom, or in what capacity a former employee may work.
This means a North Dakota employer cannot prohibit a former employee from:
- Working for a direct competitor
- Contacting former clients (beyond what a non-solicitation clause might address)
- Starting a competing business in the same city or region
- Using general skills and knowledge acquired on the job
The prohibition is a legislative statement about public policy: North Dakota has decided that worker mobility — the ability to move freely between employers and to compete — is more important than protecting any individual employer's competitive interests. North Dakota shares this categorical approach with California (Business & Professions Code § 16600) and Oklahoma (Stat. § 15-219A), making it part of a very small group of states that take this position.
The Three Narrow Exceptions That Survive
NDCC § 9-08-06 provides three enumerated exceptions — situations where a non-compete or similar restraint on trade is enforceable:
Exception 1: Sale of a Business's Goodwill. When a person sells their ownership interest in a business and transfers the goodwill of that business to the buyer, they may agree not to compete with the buyer within the same geographic area and for a reasonable time. The rationale: the buyer is paying for goodwill — the value of the seller's ongoing relationships and reputation. Allowing the seller to immediately start a competing operation would destroy what the buyer purchased. North Dakota courts require that the restriction be reasonable in geographic scope and duration, tied to the specific goodwill transferred.
Exception 2: Dissolution of a Partnership. Partners who dissolve a partnership may agree among themselves not to compete with the partnership's former business within the same geographic area. This allows departing partners to structure a clean exit without immediately poaching the firm's clients.
Exception 3: Dissolution of an LLC. The third exception — added when North Dakota codified LLC law — mirrors the partnership dissolution exception. Members of an LLC that is being dissolved may enter non-compete agreements as part of the dissolution settlement.
What these exceptions share: they all arise from business ownership changes or dissolutions — not employment relationships. A non-compete embedded in a standard employment agreement, an offer letter, an onboarding packet, or an at-will employment renewal signed years after hiring does not fall within any of these exceptions and is void.
North Dakota vs. Other States: A Non-Compete Comparison
Chart shows relative enforceability; "Void" = categorically unenforceable for employee non-competes. Sources: state statutes, 2026.
The contrast with neighboring states is striking. South Dakota allows non-competes if they are reasonable in time and geography — courts apply a balancing test, and one-to-two year restrictions in a single metropolitan area are routinely upheld. Montana permits non-competes that protect legitimate business interests and are narrowly drawn. Minnesota enacted legislation in 2023 prohibiting most employee non-competes going forward, joining North Dakota's categorical approach [MN Stat. § 181.988].
For businesses with multi-state operations, this creates a compliance puzzle: an employee who works in Fargo is likely protected by North Dakota's prohibition, while an employee based in Sioux Falls, South Dakota may be bound by a valid non-compete. Employers must audit their standard employment agreement templates state by state.
For comparison on how stricter enforcement regimes operate, see Florida Non-Compete Agreements — Florida's § 542.335 actively presumes non-competes are enforceable and requires courts to enforce them unless the employee can rebut the presumption, a near-opposite approach to North Dakota's.
What Employers Can Use Instead of Non-Competes in North Dakota
Because non-compete clauses are void, North Dakota employers must rely on other legal tools to protect legitimate business interests:
Non-Disclosure Agreements (NDAs): NDAs prohibit disclosure of specific confidential information — trade secrets, proprietary processes, client lists, pricing models — without restricting where the former employee may work. North Dakota courts will enforce a properly drafted NDA because it restricts disclosure of specific information, not the exercise of a profession.
Trade Secret Protection under NDCC Chapter 47-25.1: North Dakota has adopted a version of the Uniform Trade Secrets Act (UTSA) [NDCC §§ 47-25.1-01 through 47-25.1-08]. An employer whose trade secrets are misappropriated may seek injunctive relief, actual damages, and attorney's fees — without needing any contract clause. The key: the information must actually qualify as a trade secret (not just valuable business information) and the employer must have taken reasonable measures to keep it secret.
Non-Solicitation Clauses (Narrowly Drawn): North Dakota courts have shown more willingness to enforce non-solicitation agreements — those that prohibit a former employee from actively soliciting the employer's specific clients or employees — than broad non-competes, because non-solicitation clauses do not prevent the employee from working in their field. The critical distinction: the clause must target specific solicitation of identified clients, not general competition. Overly broad non-solicitation language that amounts to a non-compete in disguise will be treated as void.
Garden Leave Agreements: An employer may pay an employee to remain on payroll during a notice period, during which the employee agrees not to work elsewhere. Because the employee is still employed and compensated, this is a contractual arrangement — not a restraint on post-employment trade. North Dakota courts have not specifically addressed garden leave, but the general principle that a paid notice restriction is not a "restraint on trade" is well established.
Choice-of-Law Clauses: Can an Employer Route Around North Dakota's Prohibition?
Employers whose standard employment agreements include a choice-of-law clause — "this agreement shall be governed by the laws of Texas" — sometimes believe this sidesteps North Dakota's non-compete prohibition for employees who physically work in North Dakota. Courts have generally not allowed it.
North Dakota courts will apply another state's law only if it does not violate North Dakota's fundamental public policy. Because NDCC § 9-08-06 reflects an explicit legislative public policy choice, courts have consistently refused to enforce out-of-state non-compete agreements against North Dakota-based employees when the choice-of-law clause was the employer's sole argument for enforceability. Federal courts in the Eighth Circuit have similarly declined to use choice-of-law provisions to override North Dakota's categorical prohibition.
The result: employers drafting agreements for North Dakota-based employees should not count on choice-of-law clauses to salvage non-compete provisions. If an employee is located in North Dakota, the non-compete is void — regardless of what state's law the agreement nominally invokes.
What Should You Do If Asked to Sign a Non-Compete in North Dakota?
If you are a North Dakota employee asked to sign a non-compete:
Read the clause carefully: Determine whether it applies to post-employment conduct. If it restricts where you can work after leaving the company, it is almost certainly void under NDCC § 9-08-06.
Do not assume it is harmless to sign: Even a void clause can create real-world chilling effects — employers may threaten litigation and employees may avoid certain opportunities out of uncertainty. Understanding the law removes that leverage.
Identify what is actually being protected: If the agreement includes NDAs or non-solicitation clauses alongside the non-compete, those components may be separately enforceable. Sign them with clear eyes about what each provision does.
Consult an employment attorney: If your employer is insisting on a non-compete as a condition of employment or a settlement, and you are unsure of your rights, legal advice tailored to your specific situation is worth the investment.
For broader context on how North Dakota wages, leave, and employment rules fit together, see the North Dakota Labor Law: The Complete 2026 Dossier for Workers, HR, and Employers.
This article provides general legal information about North Dakota non-compete law as of 2026. It is not legal advice. Consult a licensed North Dakota employment attorney for guidance on your specific situation, whether you are an employer or employee.
