Remote Job With a Company in Another State: Which State’s Non-Compete Law Applies?

The contract’s choice of law is not the last word

Most employment contracts include a governing-law clause and a venue clause saying where disputes must be heard. Courts usually respect these in ordinary commercial contracts. For employee non-competes, they are much less reliable, because courts will not apply another state’s law where it would override a fundamental policy of the state with the closest connection to the employee. For a remote worker, that is usually the state where you live and do the work.

States that override out-of-state clauses by statute

Several states have written this protection into law, so you do not need to rely on a court’s discretion:

• California: an employee who primarily resides and works in California cannot be required, as a condition of employment, to agree to another state’s law or courts for claims arising in California, unless represented by counsel in negotiating the agreement. California also treats non-competes as void regardless of where or when they were signed.
• Colorado: a choice-of-law or venue provision requiring a worker who primarily resides or works in Colorado at termination to litigate a non-compete elsewhere is void.
• Massachusetts: a clause choosing another state’s law to avoid the Massachusetts non-compete statute is not enforceable against an employee who has lived or worked in Massachusetts for at least thirty days before leaving.
• Minnesota: employers cannot require employees who primarily live and work in Minnesota to agree to another state’s law or courts for non-compete disputes.
• Washington: a provision requiring a Washington-based employee to adjudicate a non-compete outside Washington is void.

What happens if your state has no statute on this?

In other states, a court weighs where you work, where the employer is based, where the contract was made, and whether applying the chosen law would undermine the home state’s policy. Outcomes vary. If your home state restricts non-competes and the chosen state does not, you have a real argument that your home state’s rule should govern, but it is an argument rather than a certainty.

Which legal test decides whose non-compete law applies?

Where no statute settles it, most courts start with section 187 of the Restatement (Second) of Conflict of Laws. Under it, a court generally applies the law the contract chooses, unless the chosen state has no substantial relationship to the parties or the deal, or applying that law would be contrary to a fundamental policy of a state with a materially greater interest in the issue whose law would otherwise apply. Employee non-competes are one of the most common places courts find that kind of fundamental policy.

A leading example comes from a state that does enforce non-competes. In DeSantis v. Wackenhut Corp. (1990), the Texas Supreme Court refused to apply the Florida law named in a Texas employee's contract, because the employee was hired and worked in Texas, signed the agreement there, and Texas treats the enforceability of employee non-competes as a matter of fundamental policy. The case shows that even a state friendly to non-competes may insist on its own rules for employees who work there.

The statutes described above have their own citations and remedies. California Labor Code § 925 makes an out-of-state choice-of-law or forum clause voidable at the employee's request, has California law govern the dispute, and lets the court award the employee reasonable attorney's fees; it applies to contracts entered into, modified or extended on or after January 1, 2017, and does not apply if you were individually represented by a lawyer in negotiating those terms. Colorado's rule is in C.R.S. § 8-2-113, Massachusetts's in Mass. Gen. Laws ch. 149, § 24L, Minnesota's in Minn. Stat. § 181.988 and Washington's in RCW 49.62.050.

Does moving states during a job change your non-compete?

If you relocate while employed, the relevant state may change. Many of the statutes above look at where you live or work when you leave, not when you signed. Moving from a state that enforces non-competes to one that does not can change your position, though the timing and your employer’s reaction both matter.

Practical steps

If you work remotely for an out-of-state employer:

• Note which state your contract names for governing law and venue.
• Check your own state’s non-compete rules and any earnings threshold.
• Check whether your state voids out-of-state choice-of-law clauses.
• Keep a record of where you actually live and work.
• Ask for the governing law to be your home state if the choice matters.

A worked example

Chris lives and works in Colorado for a company headquartered in Texas. His contract contains a one-year non-compete and says it is governed by Texas law, with disputes heard in Texas courts. Chris earns below Colorado’s highly compensated threshold.

Colorado makes a non-compete void for workers below its earnings threshold, and voids choice-of-law and venue clauses that would require a worker who primarily resides or works in Colorado at termination to litigate elsewhere. Chris’s position is strong. If he were above the threshold, the analysis would turn on Colorado’s other requirements, but the Texas choice-of-law clause would still not strip him of Colorado’s protections.

Why employers pick another state’s law

Employers choose governing law for predictability, and sometimes because the chosen state is more willing to enforce restrictive covenants. Delaware and Texas are common choices. For ordinary commercial contracts that choice is usually respected. For employee non-competes, states increasingly refuse to let an employer escape local protections by naming another jurisdiction.

Other clauses affected by where you work

The same question arises beyond non-competes. Wage and hour rules, final paycheck deadlines, paid leave, off-duty conduct protections and invention-assignment limits are generally governed by the state where you work. A contract naming another state’s law does not usually let an employer avoid those rules either.

Sample wording you can send

“As I live and work in [state], could the governing law and venue for this agreement be [state] as well? That keeps it consistent with the employment laws that already apply to my role.”

Common mistakes

• Assuming the governing-law clause settles which rules apply.
• Not checking your home state’s earnings threshold.
• Moving states without considering how it affects restrictions on leaving.
• Ignoring the venue clause, which can make any dispute expensive to fight.

What if you work from more than one state?

Some remote workers move around, spending months in different states. For non-compete purposes, the statutes above usually look at where you primarily reside or work, often at the time you leave. Frequent moves make that harder to establish. If your location matters to your position, keep a clear record of your primary residence, such as your address for tax, voter registration and driver’s license.

Tax and employment law follow different rules

Which state’s employment law applies and which state taxes your income are separate questions. Income tax generally follows where the work is performed, but some states tax remote work for an employer based there; New York, for example, applies a convenience-of-the-employer rule. Do not assume that the state that taxes you is the state whose non-compete rules protect you, or the reverse.

Quick checklist

• Note the governing law and venue named in your contract.
• Check your home state’s non-compete rules and earnings threshold.
• Check whether your home state voids out-of-state choice-of-law clauses.
• Keep records of your primary residence and work location.
• Consider how a move would affect your position before relocating.
• Ask for the governing law to be your home state where it matters.

Key terms explained

These are the terms you are most likely to meet in the clause itself and in any correspondence about it, explained in plain English so you can read your own contract with confidence.

• Governing law clause: the contract term naming which state’s law applies.
• Venue clause: the term naming where disputes must be heard.
• Choice of law: the legal process of deciding which state’s law applies to a dispute.
• Fundamental policy: a state’s core legal position that courts will not let a contract override.
• Primary residence: the state you mainly live in, usually shown by tax filings and registrations.
• Earnings threshold: a salary level below which some states void non-competes.
• Convenience of the employer rule: a tax rule, used in New York, that can tax remote work for an employer based there.

Working for a foreign company from the US

If you work in a US state for a company based outside the US, the contract may name a foreign law and courts. US courts will usually still apply the protections of the state where you work to a non-compete, particularly in the states listed above. Enforcing a foreign judgment in the US also requires separate proceedings, which is one more reason a foreign employer may prefer to rely on your home state’s law.

Get both states compared

ClauseAudit compares your home state with the state named in your contract, flags where a clause would be enforceable in one and void in the other, and notes where your state overrides the contract’s choice of law. Our free non-compete checker is a quick way to see your own state’s position first.