Which state's law governs a remote worker's NDA?

Generally, the law of the state where the employee physically works will apply, regardless of the employer's location or choice of law provisions. Courts typically protect resident employees under their home state's laws, especially for employee-protection statutes.

Do I need different NDAs for employees in different states?

Best practice is to either create state-specific NDA versions for employees in states with unique requirements (like California) or draft a single NDA that complies with the most restrictive applicable state. The second approach is simpler but may limit your protections.

Can a remote employee in California sign an NDA with a non-compete?

No. California Business and Professions Code 16600 applies to California residents regardless of where their employer is located. A California resident working remotely for a Texas company is still protected by California's non-compete ban.

Remote Worker NDA Guide | Distributed Teams | Multi-State Considerations

The Remote Work NDA Challenge

The rise of remote work has fundamentally changed how employers think about employee NDAs. When your workforce is distributed across multiple states, you're no longer dealing with just one state's laws - you're potentially subject to the employment laws of every state where you have employees.

This creates real challenges: A Texas-based company with employees in California, New York, and Illinois must navigate California's non-compete ban, New York's consideration requirements, and Illinois's restrictions on low-wage worker non-competes - all while trying to maintain consistent protection for company confidential information.

The Core Principle

Generally, the law of the state where an employee physically works will govern their employment relationship - regardless of where the employer is located, where the contract was signed, or what the contract says about choice of law.

Understanding Choice of Law

Most employment agreements include a "choice of law" or "governing law" provision specifying which state's law applies. However, these provisions have significant limitations when it comes to employee protections:

When Choice of Law Provisions Work

Contract interpretation: How ambiguous terms should be read
Procedural matters: Notice requirements, timing, etc.
General contract enforcement: Basic breach of contract claims

When Choice of Law Provisions Don't Work

Employee protection statutes: States protect their residents under their own laws
Non-compete enforcement: California residents are protected by California law regardless of contract terms
Public policy: Courts won't enforce provisions that violate the employee's home state's public policy
Wage and hour laws: Generally governed by where work is performed

Common Mistake

Don't assume that including "This Agreement shall be governed by Delaware law" means your non-compete will be enforceable against a California employee. California courts have consistently held that Section 16600 applies to California residents as a fundamental public policy that cannot be waived by contract.

The "Substantial Relationship" Test

When determining which state's law applies, courts typically consider:

Where the employee primarily performs work
Where the employer is located
Where the contract was negotiated and signed
Which state has the strongest interest in the dispute
The parties' reasonable expectations

For remote workers, the first factor (where work is performed) usually carries the most weight, especially for employee-protection issues.

Key States for Remote Workers

Not all states are created equal when it comes to NDA enforcement. Here's a quick overview of states that require special attention:

California Non-Compete Ban

Strictest employee protections. Non-competes void. Labor Code 2870 protects employee inventions. Strong scrutiny of overbroad NDAs.

Minnesota Non-Compete Ban

Banned non-competes effective July 2023. NDAs protecting trade secrets still enforceable. Watch for broad definitions.

North Dakota Non-Compete Ban

Long-standing non-compete ban. Similar to California but less case law. NDAs enforceable for legitimate secrets.

Oklahoma Non-Compete Ban

Non-competes generally void. Some exceptions for business sales. Confidentiality provisions enforceable.

New York Strict Review

Requires additional consideration for mid-employment NDAs. Three-part reasonableness test. Blue pencil available.

Illinois Restrictions

Non-competes unenforceable for employees earning below threshold. 14-day review period required. Attorney fees for frivolous enforcement.

Washington Restrictions

Non-competes void for workers earning under $116,593 (2024). Must disclose terms before acceptance. Garden leave may be required.

Colorado Restrictions

Non-competes limited to highly compensated workers. Notice requirements. Strong trade secret protections.

Practical Scenarios

Let's walk through common remote work scenarios and how to handle them:

Scenario 1: Texas Company, California Employee

Your startup is headquartered in Austin. You hire a software engineer who works remotely from San Francisco. The NDA includes a 2-year non-compete.

Result: The non-compete is void. California Business & Professions Code 16600 applies to California residents regardless of employer location. The NDA's confidentiality provisions remain enforceable, but any provision that functions as a non-compete will be struck.

Scenario 2: Employee Moves States

An employee signs an NDA in New York, works there for 2 years, then moves to California and continues working remotely. The NDA includes non-solicitation provisions.

Result: Complex situation. California law will likely apply going forward for work performed in California. Some courts have held that obligations accrued in New York remain enforceable, but new restrictions may be void. The safest approach: have the employee sign a California-compliant updated agreement.

Scenario 3: Digital Nomad Employee

An employee works remotely while traveling, spending time in multiple states throughout the year. No fixed home base.

Result: The law of their primary work location (where they spend the most time or are officially based) typically applies. Establish a "primary work location" in your employment records. Consider using an NDA that complies with the most restrictive applicable jurisdiction.

Scenario 4: Executive with Multi-State Responsibilities

A VP of Sales is based in Illinois but regularly travels to work with teams in California, New York, and Texas. They have deep customer relationships across all regions.

Result: Illinois law applies as their primary work location, but California law may apply to relationships and activities conducted there. The safest approach: ensure all NDA provisions would be enforceable in the most restrictive applicable state. For this employee, that means California-compliant terms.

Best Practices for Distributed Teams

Option 1: State-Specific NDAs

Create tailored NDA versions for different states:

California version: No non-compete, Labor Code 2870 notice, carefully defined confidential information
New York version: Clear consideration documentation, reasonable scope
Illinois version: Salary threshold compliance, 14-day notice period
Standard version: For states without special requirements

Pros: Maximum protection in each state
Cons: More complex to manage, requires tracking employee locations

Option 2: Universal Compliant NDA

Draft a single NDA that complies with the most restrictive state's requirements:

No non-compete provisions (for California compliance)
Include Labor Code 2870-style invention carve-outs
Clear consideration documentation for all employees
Narrowly defined confidential information
DTSA whistleblower notice

Pros: Simpler to manage, works everywhere
Cons: May provide less protection than possible in employer-friendly states

Remote Worker NDA Checklist

Document employee's primary work location in HR records
Remove or modify non-compete for employees in ban states
Include DTSA whistleblower notice (federal requirement)
Add invention carve-outs for personal projects
Document consideration provided (especially for mid-employment)
Use narrow, specific definitions of confidential information
Include clear carve-outs for general knowledge and skills
Consider governing law provision carefully (won't override employee protections)
Have process for updating when employees relocate
Train managers on NDA compliance in distributed environment

Handling Employee Relocations

When an employee moves to a different state, you should:

Update HR records: Document the new primary work location
Review existing NDA: Check if any provisions are now unenforceable in the new state
Consider a new agreement: In some cases, having the employee sign a state-appropriate NDA for their new location makes sense
Document the change: Keep records of when the relocation occurred

Proactive Approach

Include a provision in your employment agreement requiring employees to notify HR within 30 days of relocating to a different state. This allows you to update records and address any compliance issues promptly.

International Remote Workers

For employees working outside the United States, NDA considerations become even more complex:

Local law applies: Most countries have employment laws that override contract terms
Non-compete enforceability: Varies widely - some countries are more restrictive than California
IP ownership: Different rules for who owns work product in different countries
Data protection: GDPR and other privacy laws may affect what employee data you can include

For international remote workers, consult with local employment counsel to ensure your agreements comply with local law.

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Technology Considerations

Remote work also raises practical issues for protecting confidential information:

Secure Work Environments

Require company-managed devices or secure access to company systems
Implement VPN requirements for accessing sensitive information
Consider mobile device management (MDM) for remote devices
Establish clear policies for working in public spaces

Return of Materials

Include specific provisions about returning or destroying electronic files
Address personal device data when employees use BYOD
Have clear procedures for remote equipment return
Consider remote wipe capabilities for company data on personal devices

Remote Worker NDA Guide

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