The FTC non-compete rule is dead. A federal district court in Texas set it aside in August 2024 before it could take effect, the Commission dropped its appeals in September 2025, and the agency formally removed the rule from the Code of Federal Regulations on February 12, 2026.1Federal Register. Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule The FTC’s own website now states plainly that “the Noncompete Rule is not in effect and it is not enforceable.”2Federal Trade Commission. Noncompete Rule If you signed a non-compete, or you’re being asked to sign one, your rights depend entirely on the law of your state.
What Actually Happened to the Rule
The FTC finalized its non-compete ban in April 2024, with an effective date of September 4, 2024.3Federal Trade Commission. FTC Announces Rule Banning Noncompetes It never got there. On August 20, 2024, Judge Ada Brown of the U.S. District Court for the Northern District of Texas issued a nationwide order in Ryan, LLC v. FTC setting the rule aside.4Justia Law. Ryan LLC v Federal Trade Commission
The FTC appealed in October 2024 but reversed course less than a year later. On September 5, 2025, the Commission voted 3-1 to dismiss its appeals in the Fifth Circuit and Eleventh Circuit and to “accede to the vacatur” of the rule.5Federal Trade Commission. Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule The February 2026 removal of 16 CFR Part 910 finished the job.
Why the Court Struck It Down
Judge Brown concluded that the FTC lacked the statutory authority to issue the rule and that the rule itself was arbitrary and capricious under the Administrative Procedure Act.4Justia Law. Ryan LLC v Federal Trade Commission The reasoning had two parts.
On authority, the court read Section 6(g) of the FTC Act as authorizing only procedural and housekeeping rules, not sweeping substantive regulation of the American labor market. The absence of any penalty provision tied to Section 6(g) supported that narrow reading.
On the substance, the court found the rule unreasonably overbroad. The FTC relied on a handful of studies about narrow state-level restrictions to justify a near-total federal ban, failed to seriously consider less restrictive alternatives, and largely dismissed the documented benefits of non-compete agreements. A parallel case in the Middle District of Florida, Properties of the Villages v. FTC, reached a similar conclusion on the authority question and enjoined enforcement against that plaintiff.6Justia Law. Properties of the Villages Inc v Federal Trade Commission
What the Rule Would Have Done
The provisions never had legal force, but they’re worth knowing because they shape how state legislatures and future federal bills are framing the same issues.
The rule defined a non-compete clause as any employment term that prohibits, penalizes, or “functions to prevent” a worker from taking a new job or starting a business after leaving their employer.7Federal Register. Non-Compete Clause Rule It reached traditional employees, independent contractors, interns, externs, volunteers, and apprentices. Franchisees in the franchisor-franchisee relationship were excluded, though people who worked for a franchisee or franchisor were covered.2Federal Trade Commission. Noncompete Rule Entities outside the FTC’s jurisdiction, including non-profits not organized to carry on business for their own profit, banks, savings institutions, federal credit unions, and common carriers, were also outside the rule’s reach.8Federal Trade Commission. A Brief Overview of the Federal Trade Commission’s Investigative, Law Enforcement, and Rulemaking Authority
For everyone else, the rule would have banned new non-competes outright and rendered existing ones unenforceable. Employers would have been barred from entering, enforcing, or even representing to a worker that an existing clause was enforceable.
The Senior Executive Carveout
Existing non-competes with senior executives could have remained in force. To qualify, a worker had to earn at least $151,164 in total annual compensation and hold a policy-making position with final authority over significant business decisions, such as a president, CEO, or equivalent officer.7Federal Register. Non-Compete Clause Rule Department managers and executive advisors did not qualify regardless of pay. The carveout preserved only existing agreements; new senior-executive non-competes would have been prohibited too.
Sales of a Business
Non-competes tied to a bona fide sale of a business, an ownership interest, or substantially all of a business’s operating assets were exempt.2Federal Trade Commission. Noncompete Rule The final rule dropped an earlier draft’s minimum ownership percentage.
NDAs and Training Repayment Clauses
The “functions to prevent” language would have swept in agreements labeled as something other than non-competes when they operated like one. An NDA barring a worker from disclosing information “usable in” or “related to” their industry, or covering all information obtained during employment including publicly available knowledge, would have counted as a de facto non-compete. A standard NDA limited to genuinely confidential information, not touching a worker’s general skills or public knowledge, would have remained permissible.7Federal Register. Non-Compete Clause Rule
Training repayment agreement provisions, sometimes called TRAPs, followed the same logic. A reasonable reimbursement tied to actual training expenses would have survived. A required payment out of proportion to any real training cost would have been treated as a penalty for leaving, and therefore a non-compete under a different name.
What Governs Your Non-Compete Now
State law, and only state law. The variation is significant. Four states ban non-competes outright in the employment context. Another 34 states and the District of Columbia impose some form of restriction, ranging from salary thresholds below which non-competes are unenforceable to industry-specific bans, particularly in healthcare. The remaining states rely on court-created reasonableness standards that look at scope, duration, and geographic reach.
State legislatures are active. As of early 2026, numerous states had bills pending to create or expand non-compete restrictions, including new outright bans, income thresholds, and healthcare industry carveouts. A smaller number of proposals moved the other way, making non-competes easier to enforce.
On the federal side, the Workforce Mobility Act and similar bills have been introduced across multiple Congresses without advancing. The Freedom to Compete Act of 2025 was introduced in the 119th Congress but had not been enacted as of mid-2026.9Congress.gov. Freedom to Compete Act of 2025 After the Ryan decision, any future federal ban will likely need to come through legislation rather than agency rulemaking.
What This Means for You
If you’re bound by a non-compete, the FTC’s rule gives you nothing. Whether your agreement holds up depends on where you live and work: your state’s statutes, your salary compared to any state threshold, the length and geographic scope of the restriction, and whether courts in your state have grown more or less willing to enforce these clauses recently.
If you’re an employer, don’t read the rule’s defeat as a green light. State restrictions are expanding, and a clause that was enforceable a few years ago may not be today. Overly broad language that courts view as punitive has always faced skepticism, and more states are codifying that skepticism into statute.
Workers who believe a non-compete is being used to suppress competition can still report the conduct to the FTC’s Bureau of Competition through its antitrust complaint webform.10Federal Trade Commission. Antitrust Complaint Intake The FTC retains case-by-case authority to challenge unfair methods of competition. But individual disputes over whether a specific non-compete is enforceable are resolved in state court under state law, and an employment attorney licensed in your state is the right first call.