The FTC backed off the national ban. The states didn’t. Here’s what that means for the two most important noncompetes in your deal.
You’re about to buy an HVAC company. The seller seems great — knowledgeable, connected, respected in the market. The purchase agreement includes a standard five-year noncompete preventing the seller from opening a competing business within 50 miles.
Six months after closing, you find out that clause is unenforceable in your state. The seller opens a new shop 12 miles away. Takes three technicians and 40% of the commercial accounts.
This isn’t hypothetical. It’s the exact scenario playing out across the country as the noncompete legal landscape shifts under buyers’ feet.
What Just Happened at the Federal Level
In April 2024, the FTC voted to ban virtually all noncompete agreements nationwide. The business world spent months preparing for a seismic shift.
Then the courts blocked it. In August 2024, a Texas federal court struck down the rule. By February 2026, the FTC formally withdrew the ban from the Federal Register, shifting to a case-by-case enforcement approach.
The net result: there is no federal noncompete ban. But the FTC’s attempted ban accelerated state-level action — and that’s where the real changes are happening.
The State-by-State Patchwork That Matters
Here’s the current landscape as of March 2026:
States That Ban or Severely Restrict Noncompetes
- California: Complete ban. Noncompetes for employees are void and unenforceable, period. Has been this way for decades.
- Minnesota: Banned all employee noncompetes effective July 2023.
- Oklahoma: Noncompetes generally unenforceable for employees.
- North Dakota: Noncompetes for employees are void under state law.
- Washington: Governor Ferguson signed a bill in March 2026 banning nearly all noncompetes, effective June 30, 2027.
States With Income-Based Restrictions
- Colorado: Noncompetes enforceable only for employees earning over approximately $150,000/year (adjusted annually). Most HVAC technicians earn $50K–$85K — well below the threshold.
- Oregon: $113,241 minimum earnings threshold.
- Illinois: $75,000 minimum for noncompetes.
- Virginia: SB 170 (2026) limits enforceability for employees terminated without severance or cause.
- Washington (current, pre-2027 ban): $116,593 minimum threshold.
States Where Noncompetes Are Still Broadly Enforceable
- Florida: Strong enforcement tradition. Reasonable time and geographic scope required, but courts generally uphold them.
- Texas: Enforceable if ancillary to an otherwise enforceable agreement and reasonable in scope.
- Ohio, Georgia, Pennsylvania: Generally enforceable with reasonable restrictions.
The pattern is clear: the trend line runs toward restriction, not enforcement. States are either banning noncompetes outright, raising income floors that exclude most hourly workers, or adding procedural requirements that make enforcement harder.
Two Noncompetes, Two Different Risks
For an HVAC buyer, there are two completely separate noncompete questions — and most buyers conflate them.
Risk #1: The Seller’s Noncompete
This is the noncompete in your purchase agreement that prevents the seller from starting or joining a competing HVAC business after the sale.
The good news: Seller noncompetes in the context of a business sale are treated differently than employee noncompetes. The FTC’s withdrawn rule explicitly carved out noncompetes arising from the sale of a business. Even in California, courts have historically upheld reasonable noncompetes tied to the sale of goodwill.
The risk: “Treated differently” doesn’t mean “automatically enforceable.” A seller noncompete still needs to meet state-specific requirements for:
- Duration: 3–5 years is standard. More than 5 years faces increasing scrutiny.
- Geographic scope: Must be reasonable for the market. A 50-mile radius in rural Montana is different from 50 miles in downtown Chicago.
- Activity scope: “Any HVAC-related business” is overbroad in some states. “Residential HVAC installation and service” is more defensible.
- Consideration: The purchase price itself is typically sufficient consideration, but the noncompete should reference it explicitly.
What to do:
- Have your acquisition attorney draft the noncompete — don’t rely on a template or the seller’s attorney’s version.
- Research enforceability in the specific state where the business operates. A noncompete drafted for Texas requirements may be unenforceable in Colorado.
- Include a liquidated damages clause — a pre-agreed penalty amount if the seller violates the agreement. This avoids the cost and uncertainty of proving actual damages in court.
- Consider a non-solicitation clause as a backstop: even if the noncompete fails, a non-solicitation agreement preventing the seller from contacting existing customers or recruiting employees may survive.
Risk #2: Employee Noncompetes (Your Technicians)
This is the one that keeps HVAC buyers up at night — or should.
Your lead installer, your top diagnostic tech, your service manager — do they have noncompete agreements? And if so, are those agreements actually enforceable?
The reality check for HVAC: Most HVAC technicians earn $50,000–$85,000 per year. In states with income thresholds — Colorado ($150K), Oregon ($113K), Illinois ($75K), Washington ($116K) — these agreements are already unenforceable for most of the workforce. In states that ban noncompetes entirely (California, Minnesota, Oklahoma, North Dakota, and soon Washington), they’re void regardless of income.
Even in states where technician noncompetes are technically enforceable (Florida, Texas, Ohio), practical enforcement is questionable:
- Cost of enforcement: Litigating a noncompete costs $15,000–$50,000. Are you going to sue a $65K/year technician who left to join a competitor?
- Jury sympathy: Courts increasingly view noncompetes on hourly workers as overreaching. Judges grant injunctions less frequently for non-executive employees.
- Recruitment impact: In a market short 110,000 technicians, requiring noncompetes as a condition of employment makes it harder to hire. The technicians you most want to recruit are the ones with the most options.
The due diligence question: Don’t just ask whether the seller has employee noncompetes. Ask whether they’re enforceable under current state law. If they’re not — and in a growing number of states, they’re not — then your employee retention strategy can’t rely on legal coercion. It has to rely on compensation, culture, and career path.
The Non-Solicitation Alternative
As noncompetes weaken, non-solicitation and non-disclosure agreements become the functional protection layer. They’re narrower, more enforceable, and survive in states where noncompetes don’t.
Non-solicitation (customers): Prevents a departing employee from actively contacting existing customers for a defined period (typically 12–24 months). Doesn’t prevent the employee from working in HVAC — just from targeting your customer base.
Non-solicitation (employees): Prevents a departing employee from recruiting other employees to leave with them. This is critical in HVAC, where a lead tech leaving often means two or three others follow.
Non-disclosure/trade secrets: Protects customer lists, pricing strategies, vendor terms, and operational processes. Enforceable in virtually every state and not subject to the same restrictions as noncompetes.
For a buyer: if the seller’s technicians don’t have non-solicitation agreements, build them into your first-week transition plan. Pair them with a retention bonus (12-month vesting) to give employees a reason to sign. A $3,000–$5,000 retention bonus tied to a non-solicitation agreement is cheaper than losing a technician and their customer relationships.
What This Means for Your Purchase Agreement
The purchase agreement is where all of this comes together. Here’s what your attorney should include:
Seller representations about existing agreements:
- Full disclosure of all employee noncompete, non-solicitation, and non-disclosure agreements
- Representation that the seller hasn’t entered into any agreements that would prevent key employees from continuing employment
- Disclosure of any prior noncompete enforcement actions — did the seller ever try to enforce one? What happened?
Seller’s own noncompete:
- Customized to state-specific enforceability requirements — not a generic template
- Reasonable duration (3–5 years), geographic scope (match the service area), and activity scope
- Liquidated damages clause with a specific dollar amount
- Non-solicitation of customers AND employees as a separate, severable clause
Employee transition protections:
- Seller cooperation in introducing the buyer to key employees during the transition period
- Agreement that the seller will not recruit employees for a defined period (even beyond the noncompete)
- Buyer’s right to present retention packages, including new non-solicitation agreements
Key employee retention contingency:
- Identify the 3–5 employees whose departure would materially affect the business
- Consider making a portion of the purchase price contingent on those employees remaining through a 90-day or 180-day period
- Structure retention bonuses for key employees as a closing cost, not a post-close expense
The Due Diligence Checklist
- List all employee noncompete, non-solicitation, and non-disclosure agreements currently in effect
- Verify enforceability under current state law — check income thresholds, recent legislation, and judicial trends
- Identify which key technicians have NO restrictive covenant of any kind
- Research the seller’s state for noncompete legislation introduced or pending in 2026
- Review the seller’s noncompete clause in the purchase agreement with state-specific counsel
- Confirm the noncompete has proper consideration, reasonable scope, and liquidated damages
- Include non-solicitation clauses as separate, severable provisions
- Plan retention packages for key employees who lack enforceable restrictive covenants
- Check whether the seller has ever tried to enforce a noncompete — outcome reveals enforceability reality
The Bottom Line
The FTC’s failed ban didn’t change the law — but it changed the trajectory. States are moving fast: Washington just banned noncompetes entirely, Virginia restricted them for terminated employees, and Colorado’s income threshold eliminates coverage for most HVAC workers.
For a buyer, the practical implication is simple: you cannot rely on noncompetes to keep your workforce. You can — and should — protect yourself with a properly drafted seller noncompete, robust non-solicitation agreements, and retention packages that give key employees a financial reason to stay.
The legal landscape tells you what you can’t enforce. Your compensation structure and culture determine what you don’t need to.
Understanding workforce protection starts with knowing who’s at risk of leaving. The technician pay audit helps you identify retention risk before closing, and the culture due diligence guide explains how to read the warning signs of a workforce that’s already looking for the exit. For the operational side of the ownership transition, the first-week checklist maps out the critical employee conversations day by day.
