FTC Non-Compete Ban Compliance Risk Estimator

How this risk estimator works

The tool converts your inputs into a single numerical score. Higher scores reflect greater potential complexity, remediation effort, and enforcement exposure if the FTC rule (or stricter state regimes) apply to you. Lower scores generally reflect fewer covered workers, clearer documentation, and stronger reliance on non-compete alternatives.

At a high level, the model considers four clusters of factors:

• Workforce coverage: How many U.S. employees you have, and what share are currently bound by non-competes, with special attention to senior executives.
• Geographic footprint: In how many states you use non-compete agreements, which increases coordination and state-law complexity.
• Documentation & readiness: Whether you can readily identify agreements and whether you have prepared rescission notices.
• Alternative protections & structure: The extent to which you rely on non-solicit/confidentiality agreements, the strength of your trade secret safeguards, and whether you operate as a franchisor or franchisee using non-competes.

Each of these elements influences the score in a clear direction: higher coverage ratios, more states, weaker documentation, and heavier franchise use tend to push the score upward (higher risk). Stronger trade secret protections and greater reliance on non-compete alternatives tend to pull the score downward (lower relative risk), because you are less dependent on traditional non-compete clauses to protect your business.

Key inputs and formulas

The estimator uses simple ratios and scaled scores derived from the values you enter. Conceptually, a few core relationships matter most:

• Coverage ratio: the share of your U.S. workforce currently bound by non-competes.
• Executive concentration: the proportion of covered workers who are senior executives potentially within the FTC’s narrow exception for existing agreements.
• State complexity index: a simple measure of how many states you must consider for compliance planning.
• Safeguard strength: a 1–5 self-assessment of your trade secret program that moderates the score.

For example, the coverage ratio is calculated as:

As this ratio approaches 1.0 (or 100%), the model interprets that as a heavier overall dependency on non-competes and increases the risk score accordingly. When the ratio is low, the risk contribution from this component is correspondingly lower.

Similarly, executive concentration can be expressed as:

This is relevant because the FTC’s final rule includes a narrow exception allowing enforcement of existing non-compete agreements for certain senior executives (as defined by a compensation threshold and policy-making responsibilities), even while banning new non-competes going forward. A higher executive share may indicate that a larger proportion of your existing agreements could remain technically enforceable, although practical and state-law considerations still matter.

The number of states in which you use non-competes acts as a simple complexity multiplier. The more states involved, the more likely you must track differing wage thresholds, notice requirements, and public policy restrictions. The trade secret safeguard score is used to make modest downward adjustments to the overall risk score where policies, training, and technical controls are strong.

The internal weighting and exact formula used by the calculator may differ from these conceptual descriptions, but the qualitative effects are the same: values that increase enforcement, remediation, or litigation complexity will tend to increase your score; values that show stronger preparedness and reliance on non-compete alternatives will tend to decrease it.

How to use this estimator

1. Gather basic workforce data. You will need an approximate count of your total U.S. employees, how many are currently subject to non-compete clauses, and how many of those are senior executives. If you do not have exact figures, use best estimates and document your assumptions internally.
2. Identify your geographic footprint. Count the number of U.S. states where you have employees currently working under non-compete agreements. Focus on where the workers perform their jobs, not only on where your legal entities are formed.
3. Assess your documentation and planning. Decide whether you maintain a reasonably complete, searchable inventory of non-compete agreements, and whether you have drafted or templated rescission notices that could be used if the rule requires you to notify workers.
4. Evaluate non-compete alternatives. Indicate whether you routinely use non-solicitation and confidentiality agreements in addition to, or instead of, non-competes. Then assign a 1–5 score to your trade secret safeguards, considering access controls, onboarding/offboarding procedures, monitoring, and incident response.
5. Note any franchise relationships. If you are a franchisor or franchisee that uses non-competes with franchisees, their employees, or your own staff, indicate this. Franchising can introduce additional layers of contractual and regulatory scrutiny.
6. Run the calculation and record the score. Click the button to generate a risk score. Keep a record of the score, the date, and any key assumptions you made so you can refine the inputs over time.

This tool is designed primarily for in-house counsel, HR leaders, compliance officers, and security or risk teams at mid-sized and large U.S. employers, including multi-state organizations and franchise systems. Smaller employers can also use it as a directional guide, particularly if they rely heavily on non-compete agreements.

Interpreting your risk score

The numeric score represents a directional view of how challenging it may be to comply with an FTC-style non-compete ban and evolving state rules, based on the factors you entered. It is not a prediction of whether you will be investigated or sued, and it does not reflect every nuance of your contracts or workforce.

As you review your result, consider the following interpretation bands as a general guide:

The precise numeric thresholds for each band are less important than the patterns behind them. If you see that coverage is high, your footprint is wide, and your documentation is limited, your relative risk is higher, even if your numeric score sits near a band boundary.

Worked example

Consider a hypothetical employer with the following profile, similar to the default values in the form:

• Total U.S. employees: 1,200
• Employees currently bound by non-competes: 480
• Senior executives with non-competes: 35
• Number of states where agreements are used: 12
• No comprehensive searchable inventory of agreements
• Rescission notices in progress, but not finalized or deployed
• Use of non-solicit/confidentiality agreements for key roles
• Trade secret safeguards rated 3 on a 1–5 scale
• Not a franchisor or franchisee using non-competes

The coverage ratio in this scenario is 480 / 1,200 = 0.4, or 40%. That means a significant minority of the workforce would potentially be affected by a broad non-compete ban, creating a real but manageable remediation task. The executive share is 35 / 480, or a little over 7%, indicating that only a small proportion of bound workers might fall into the FTC’s narrow senior executive exception for existing agreements.

Using non-competes in 12 states suggests a moderate to high level of geographic complexity. The HR and legal teams will need to confirm how each state’s rules interact with the FTC framework and may need to customize notices, timing, or substitute agreements.

On the positive side, using non-solicit and confidentiality agreements and having mid-level (3/5) trade secret safeguards points toward a moderate level of preparedness to operate without non-competes, especially if safeguards can be improved. However, the absence of a complete, searchable inventory of agreements means that identifying all affected workers and sending timely rescission notices could be challenging.

In a case like this, the estimator is likely to return a score in a moderate to higher relative risk band. That does not mean imminent enforcement, but it does suggest that leadership should:

• Accelerate efforts to build an agreement inventory from HRIS, e-signature, and document management systems.
• Finalize and pre-approve rescission and explanatory notices for different worker categories, working with counsel.
• Review and strengthen trade secret controls, including access permissions, offboarding checklists, and monitoring.
• Plan for expanded use of non-solicit and confidentiality agreements where lawful and appropriate.

Franchisors, franchisees, and non-compete exposure

Being a franchisor or franchisee often adds additional layers of risk. Franchise systems may use non-competes in several ways: in franchise agreements with franchisees, in contracts with managers or key employees, and in ancillary agreements that restrict competition in certain territories. Regulators and courts may scrutinize how these restrictions affect worker mobility and market competition, especially when large franchise networks are involved.

In this estimator, indicating that you are a franchisor or franchisee using non-competes increases the score because:

• Unwinding or amending contract language across many franchise relationships can be operationally complex and time-consuming.
• Franchise agreements may span multiple states with different legal standards, complicating compliance planning.
• There may be greater antitrust and unfair competition scrutiny where non-competes limit opportunities for workers within a branded network.

If the tool flags a higher relative risk for a franchise system, the next steps often include a structured contract review project, prioritizing high-impact territories and roles, and considering alternative, more targeted restrictions that comply with both franchise and employment law.

Assumptions and limitations

This estimator is intentionally simplified. It is meant to support planning conversations, not to deliver a definitive compliance answer. It operates under several important assumptions:

• User-supplied data: The accuracy of the score depends entirely on the figures and choices you enter. If your inputs are approximate or incomplete, the result will only be a rough indicator.
• Evolving legal landscape: The FTC’s non-compete rule is subject to ongoing litigation and may be delayed, narrowed, or overturned. State laws also change frequently, and some states may adopt new restrictions even if the FTC rule is modified.
• Simplified definitions: The concept of a “senior executive” in the FTC rule involves both compensation thresholds and policy-making authority. This tool does not determine whether any individual worker meets that standard; it relies on your judgment and internal classifications.
• No state-specific tailoring: The estimator does not distinguish among particular states or incorporate the full details of their statutes and case law. It treats additional states primarily as additional complexity.
• Directional risk only: The score is a high-level risk indicator designed to help prioritize tasks like inventory building, notice planning, and trade secret improvements. It does not measure the likelihood of a specific enforcement action, lawsuit, or damages award.

For these reasons, the output should be used as one input among many in your broader compliance planning. It is not a substitute for a detailed review of your agreements, policies, or state-law obligations.

Important disclaimer

This tool and its outputs are for informational and educational purposes only. They do not constitute legal advice, do not create an attorney–client relationship, and should not be used as a substitute for advice from qualified legal counsel. You should consult with your own attorneys to understand how the FTC rule, state law, and contractual obligations apply to your specific situation.

Next steps after using the estimator

Once you have a score and a sense of your relative risk band, consider the following practical next steps:

• Share the results with your legal, HR, and information security teams and align on your organization’s key exposure areas.
• Begin or continue building a centralized, searchable inventory of non-compete agreements, including legacy paper files and digital contracts.
• Work with counsel to develop a playbook for different legal scenarios (for example, full rule implementation, partial implementation, or state-only changes).
• Strengthen trade secret safeguards, training, and monitoring so you can protect critical information without relying on broad non-compete clauses.
• Revisit your use of non-solicit and confidentiality agreements to ensure they are appropriately scoped, compliant with applicable law, and aligned with your business needs.

As the legal environment evolves, you can return to this estimator, update your inputs, and track how your relative position changes over time as you implement mitigation steps.