At least in the state of California, noncompete contracts are invalid. The long-standing law was challenged in a recent lawsuit but it stands.
A law regarding noncompete contracts that has been on the books in California since 1872 was recently challenged but upheld. The law, forbidding management to restrict employees' options in their next job or business, was challenged in the Edwards vs. Arthur Andersen case. (Edwards was a tax manager who had signed an invalid noncompete clause.)
Noncompete contracts started being more commonly used by companies during the dot-com boom in order to prevent employees from taking their valuable knowledge of technology to competing companies.
According to a CNET News article, the fact that this law was upheld is "good news for California-based tech employees who want to take their skills to another company, or head a start-up that may directly compete with their former employer."
Toni Bowers is the former Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.