Iowa non-compete law: the Lamp test, partial enforcement and the 2026 UIHC rule

Iowa enforces employee non-competes that are reasonable, under Iowa Supreme Court case law rather than a general statute. Courts ask three questions from Lamp v. American Prosthetics (1986): is the restriction reasonably necessary to protect the employer's business, is it unreasonably restrictive of the employee's rights, and is it prejudicial to the public interest. The employer carries the burden, and under Ehlers v. Iowa Warehouse (1971) a court may enforce an overbroad covenant to a reasonable extent unless the employer acted in bad faith. Two narrow statutes cover health care: one bars non-competes in health care staffing agency contracts, and one, effective June 2, 2026, bars them in clinician contracts at the University of Iowa Hospitals and Clinics. That is the law as of October 2026.

For a recruiter, Iowa means a candidate's covenant may well be enforced, possibly in a narrowed form, and the facts about what the candidate actually did for the employer decide how much. The general screen is in non-compete questions for candidates, and the agency-side clauses are in non-solicitation clauses for recruiters.

Does Iowa have a non-compete statute?

Not a general one. Two statutes reach specific employers:

• Iowa Code 135Q.2 bars a health care employment agency from restricting "in any manner the employment opportunities of an agency worker by including a noncompete clause in any contract with an agency worker or health care entity," and from requiring liquidated damages, employment fees or other compensation if the worker is later hired permanently. A contract that violates it "shall be unenforceable in court." The exception covers contracts placing a worker the agency helped obtain authorization to work in the United States, with an initial term of at least 24 months, a total of no more than 36 months and a single health care entity.
• Iowa Code 262.9(43), added by House File 2254 (2026 Iowa Acts chapter 1173, approved June 2, 2026 and effective on enactment), requires the Board of Regents to develop a policy prohibiting the University of Iowa Hospitals and Clinics from including a noncompete clause in an employment contract with an advanced registered nurse practitioner, licensed practical nurse, pharmacist, physician, physician assistant or registered nurse. It applies to contracts "entered into, extended, or renewed on or after" that date.

Every other covenant, including clinicians at other Iowa hospitals and clinics, is judged under case law.

What test do Iowa courts use?

The Iowa Court of Appeals set it out in Glascock v. Covenant Medical Center, filed July 20, 2022. Iowa law "generally disfavors" non-competes as restraints of trade (Revere Transducers v. Deere & Co., 1999), and courts apply a three-pronged test: "(1) Is the restriction reasonably necessary for the protection of the employer's business; (2) is it unreasonably restrictive of the employee's rights; and (3) is it prejudicial to the public interest?" (Lamp, 1986). The test "is essentially a reasonableness standard with the burden of proof on the employer who seeks enforcement" (Iowa Glass Depot v. Jindrich, 1983).

In Ag Spectrum Co. v. Elder, filed August 2, 2017, the Eighth Circuit, applying Iowa law, listed the factors from Iowa Glass Depot: the employee's closeness to customers; the employee's "peculiar knowledge gained through employment that provides a means to pirate the customer"; the amount and sophistication of employer-provided training and the nature of the business; and "matters of basic fairness." It refused to enforce a covenant against a seller who had brought his own customers to the company, because the clause would let the company "capture customers that someone else provided."

Will an Iowa court narrow an overbroad covenant?

It can, unless the employer overreached in bad faith, but it does not have to. In M & F Livestock v. Mohr, filed May 29, 2009, the Court of Appeals quoted the Iowa Supreme Court's rule from Ehlers: "unless the facts and circumstances indicate bad faith on the part of the employer, we will enforce noncompetitive covenants to the extent they are reasonably necessary to protect his legitimate interests without imposing undue hardship on the employee when the public interest is not adversely affected."

The same case shows the limit. The covenants would have kept a hog broker from operating anywhere in North America, and the agreement expressly let the court modify them. The district court found bad faith, undue hardship and harm to the public interest, refused to reform the covenants and rejected them entirely. The Court of Appeals affirmed, explaining that Iowa case law "allows for reformation of restrictive covenants in limited circumstances" but "does not require reformation." It contrasted Farm Bureau Service Co. v. Kohls (Iowa 1972), where a two-county, two-year covenant was cut down to six townships for an employee competing with customers his employer had given him. So "too broad" in Iowa can mean "narrowed," at the court's discretion, or "gone."

Are physician and nurse non-competes enforceable in Iowa?

Outside UIHC, yes, under the same test. Glascock is a recent example. A bariatric surgeon's agreement barred practice in his specialty for 18 months within 25 miles, with a buy-out of one year's compensation. He left, began working as a bariatric surgeon less than 25 miles away, and four staff members from the program followed him. The Court of Appeals rejected his arguments that the employer had abandoned its interest and that enforcement harmed the public, quoted the Iowa Supreme Court's statement that restrictive covenants "between doctors have been recognized as valid and enforceable" (Cogley Clinic v. Martini, 1962), and affirmed damages and attorney fees for the employer.

The 2026 UIHC rule is narrow: one employer, six license types, and only contracts entered into, extended or renewed on or after June 2, 2026. A nurse moving from another Iowa health system, or a UIHC physician on an older contract not yet renewed, may still have a covenant that counsel needs to see.

Iowa non-compete rules at a glance

What should a recruiter ask an Iowa candidate?

Ask early in the phone screen, the same way for every candidate for the role. The Iowa Glass Depot factors tell you which facts counsel will want.

IOWA CANDIDATE — restrictive agreements

1. "Have you signed a non-compete, a customer or employee non-solicit,
    or a confidentiality agreement with your current or a past employer?"
2. "How long does it last, and what area, customers or type of work
    does it cover?"
3. "Were you the main contact for customers, and did any of them come
    with you from before you joined?"
4. "What training did the employer give you beyond normal on-the-job
    training?"
5. Health care roles: "Which license do you hold, who is your employer,
    and when was the contract signed or last renewed?"
6. "Is there a buy-out amount, and does it name which state's law applies?"
Always: "We don't want any confidential information, documents or
client lists from your current employer."

• Do not tell a candidate "that's too broad, Iowa won't enforce it." Iowa courts can narrow rather than discard.
• Do not ask the candidate to bring colleagues. In Glascock the agreement also barred soliciting employees.
• Do record "18-month, 25-mile specialty covenant with buy-out, signed 2002" rather than an opinion.

What is the risk to the hiring company?

Glascock shows the realistic outcome: a narrowed or enforced covenant, damages, and the prevailing party's attorney fees where the contract provides for them. Former employers sometimes also sue the new employer, for example alleging interference with the contract or misuse of confidential information; how that plays out depends on what the new employer knew and did, which is for its counsel.

Lower the risk by telling the client about the covenant before final interviews, letting counsel review it and any buy-out before the offer, scoping the first months of the role away from restricted customers or territory, and repeating at the offer call that the company wants no confidential information and no help recruiting former colleagues.

Is Iowa banning non-competes more broadly?

Not on the current record. Senate File 380 of the 91st General Assembly, "relating to prohibitions on noncompete covenants involving nurses," shows only its introduced version on the Legislature's site as of October 2026. The 2026 change that passed, HF 2254, is limited to UIHC. Re-check the Legislature's site when the 2027 session opens.

Where does the federal FTC rule stand?

It does not apply. The FTC's Noncompete Rule page says the rule "is not in effect and it is not enforceable" and notes the August 20, 2024 court order; the Commission voted on September 5, 2025 to dismiss its appeals and accept the vacatur; and a February 12, 2026 notice removed it from the Code of Federal Regulations. Iowa covenants are governed by Iowa law.

Staffing agencies and their own agreements

If you place nurses or other workers with Iowa health care entities, 135Q.2 applies to your own contracts: no noncompete clause with the worker or the facility, and no conversion fee, with the narrow immigration exception. The registration, insurance and reporting rules that come with it are in the Iowa staffing agency license guide. Outside health care, the Lamp and Ehlers rules apply when your agency asks its own recruiters to sign covenants.

An Iowa candidate may have signed while working across a state line, and the neighbors differ sharply. Minnesota makes most covenants not to compete "void and unenforceable" under Minn. Stat. 181.988 (details in Minnesota non-compete law), Illinois has pay thresholds (Illinois), and Nebraska applies its own, narrower test (Nebraska). For the other Iowa rules on a hire, see hiring employees in Iowa and Iowa background check laws.

An Iowa checklist

• Restrictive-agreement question asked of every candidate, in the same words.
• Facts recorded: duration, radius or customers, signing date, buy-out, governing-law clause.
• Customer origin and training captured for the Iowa Glass Depot factors.
• No assumption that an overbroad covenant is void.
• Health care roles: license, employer and contract date checked against UIHC and 135Q rules.
• No request that the new hire recruit former colleagues.
• Client told before final interviews; counsel reviews before the offer.