To be valid, a restrictive covenant must be reasonably limited in time and place, be accompanied by consideration, protect a legitimate employer interest, and not be unreasonably harmful to the employee or to the public.
State law governs restrictive covenants.
Therefore, their validity, strength, usefulness, and legality vary across the United States. The growth of the Internet transformed the dynamics of the labor market by shifting the demand for certain groups of employees and by changing the corporate investment in human capital. Today, employees embody much of a high technology firm's capital. Also, in the ever-shrinking global marketplace employees change jobs with increasing frequency and often cross state lines in the process. Traditionally, covenants not to compete functioned as one of an employer's most effective strategies for protecting investment in human capital by preventing employees from defecting to competitors.