Workers sign noncompete agreements as they join your company. They outline what work ex-employees can pursue when they part ways with your company, or what type of businesses they can form after they leave. For example, a court could rule that keeping your former VP of marketing from working with one of your key competitors in the online travel reservation business is fair and reasonable, but keeping the veep from working in any capacity for any company in the high-technology field is too restrictive.
Rules vary by state.
In states, such as Wisconsin, where the rules don't permit modification, a noncompete that's deemed too broad could end up being thrown out and you'd be out of luck. A few states, such as California, take such a dim view of noncompete agreements that they can be nearly impossible to enforce. Although there can be exceptions, generally the state law that the agreement will fall under will be where the employee's work takes place. So if a company is headquartered in Dallas, but the employee in question works in Tampa, then the laws of Florida would apply. The attorney you hire to help you draw up the contract can provide you with background on local regulations.