NDA vs. Non-Compete vs. Non-Solicitation: What’s the Difference?

NDA: protects information

A non-disclosure agreement says the recipient will keep the other side’s confidential information to itself and use it only for an agreed purpose. It doesn’t stop anyone from working, competing or hiring. A standard NDA, including FastNDA’s, says outright that either party may build competing products, as long as it doesn’t use the other’s confidential information to do it.

Because it restricts so little, courts generally enforce a reasonable NDA, including in states that ban most non-competes. The usual limits still apply: it has to cover information that’s actually confidential, and it can’t block legally protected disclosures, such as reporting possible violations of law to a government agency.

Non-compete: limits competition

A non-compete, or covenant not to compete, is a promise not to compete with the other party for a period of time, often within a geographic area. It’s most common in employment, where an employee agrees not to work for a competitor after leaving, and in the sale of a business, where the seller agrees not to open a rival business down the street.

This is where state law varies most. California has long made most non-competes void, with narrow exceptions such as the sale of a business. North Dakota, Oklahoma and, for agreements made since July 2023, Minnesota also bar most employee non-competes, and many other states allow them only within limits, such as income thresholds, advance notice, or a reasonable length and area. A federal rule that would have banned most non-competes nationwide was set aside by a court in 2024, and the FTC dropped its appeal in 2025, so for now the rules come mainly from state law.

An NDA is the wrong place for a non-compete. Adding one turns a routine agreement into a negotiation, and in some states it may not be enforceable at all. If you need one, it belongs in an agreement drafted for that purpose by a lawyer who knows the state’s rules.

Non-solicitation: limits who you approach

A non-solicitation agreement, or non-solicit, is narrower than a non-compete. The person can still compete, but agrees not to actively recruit the other side’s employees, or not to pursue its customers, for a period of time.

Employee non-solicits often appear in lawyer-drafted NDAs for acquisitions and partnerships, because each side is about to meet the other’s team. Customer non-solicits are more common in employment and sale-of-business agreements. Many states treat non-solicits more favorably than non-competes, but not all: California, for one, restricts many of them too, particularly in employment.

When an NDA works like a non-compete

The label doesn’t settle it. An NDA that defines confidential information so broadly that the recipient can’t work in their field without breaching it can be treated as a non-compete in disguise, and a California appeals court has refused to enforce confidentiality terms like that.

A fair NDA avoids the problem with a definition limited to information that’s really confidential, and with the standard exclusions for information that’s public, already known or independently developed. What to include in an NDA walks through those clauses.

Side by side

In short:

• NDA. Restricts disclosing or misusing confidential information. Common in business discussions and with contractors, investors, candidates and buyers. Generally enforced when reasonable.
• Non-compete. Restricts working for a competitor or running a competing business. Common in employment and business sales. Enforceability varies more by state than any of the three, and most employee non-competes are void in California and a few other states.
• Non-solicit. Restricts recruiting the other side’s employees or pursuing its customers. Common in employment, acquisitions and partnerships. Often treated more favorably than non-competes, with limits in some states.

Which do you need?

For most business conversations, an NDA alone is enough. It protects what you share without restricting anyone’s livelihood, and the other side can sign it quickly. If you need more, such as a promise not to hire away your team during acquisition talks, use an agreement written for it.

FastNDA’s template is confidentiality only. It has no non-compete or non-solicitation clause, its clauses can’t be edited, and it says both sides stay free to compete fairly. You can read it in full before deciding.