Did the FTC ban non-competes?

Counteroffer · Answers · non-compete Source: https://trycounteroffer.com/answers/ftc-non-compete-ban-status

Short answer: The FTC issued a rule in April 2024 that would have banned most employer-employee non-competes nationwide. In August 2024, the United States District Court for the Northern District of Texas vacated the rule (Ryan LLC v. FTC), holding the FTC lacked authority to issue it. The decision is currently on appeal. As of mid-2026, the rule is not in effect, and state law continues to govern non-compete enforceability.

The April 2024 rule

The Federal Trade Commission published its final non-compete rule on April 23, 2024 (16 CFR Part 910). The rule would have done the following:

Banned most employer-employee non-compete clauses entered into after the effective date
Voided existing non-compete clauses for all workers except senior executives (defined as policy-making employees earning more than $151,164 annually)
Required employers to provide notice to affected workers that existing non-competes were unenforceable
Preserved senior executive non-competes that were already in place (grandfathered), but banned new ones

The rule was scheduled to take effect September 4, 2024. Multiple business groups (including the U.S. Chamber of Commerce and several individual employers) filed lawsuits seeking to block the rule, citing constitutional and statutory grounds.

The August 2024 court decision

On August 20, 2024, Judge Ada Brown of the United States District Court for the Northern District of Texas issued a final judgment in Ryan LLC v. FTC. The court held:

The FTC lacks substantive rulemaking authority over unfair methods of competition under Section 6(g) of the FTC Act
Even if the FTC had such authority, the rule itself was arbitrary and capricious because it was overbroad and lacked individualized analysis
The rule was set aside on a nationwide basis

The decision was a final judgment, not a preliminary injunction, which means it took effect immediately and applied to all employers, not just the plaintiffs.

A separate case in the Eastern District of Pennsylvania (ATS Tree Services v. FTC) reached the opposite conclusion in July 2024, denying a preliminary injunction against the rule. But the Texas decision came later, was a final judgment, and set aside the rule on a national basis.

The FTC appealed the Texas decision to the Fifth Circuit Court of Appeals. As of last update, briefing was underway and oral argument had not yet occurred. Outcome timing depends on the Fifth Circuit's schedule and any subsequent Supreme Court review.

Where it stands now

The FTC's non-compete rule is not in effect. Existing non-competes remain governed by state law. The legal landscape is:

State law continues to govern non-compete enforceability. See Are non-competes enforceable? for the state-by-state framework.
The Texas decision is on appeal. If the Fifth Circuit reverses, the rule could be reinstated. If the Fifth Circuit affirms, the FTC may seek Supreme Court review.
The NLRB's position is unaffected. The National Labor Relations Board continues to take the view that broad non-competes may violate Section 7 of the NLRA for non-supervisory employees.
State legislatures continue to act independently. Several states (Minnesota, Colorado, Massachusetts, Washington) have enacted significant non-compete reforms in recent years that operate independently of any federal rule.

This status can change quickly. The Fifth Circuit could rule any week. We track updates in every Counteroffer non-compete review and note the current FTC rule status in the delivered report.

What changes when the rule is in effect

If the FTC rule is ultimately upheld and takes effect, several things change:

Most existing non-competes for non-senior-executive workers become unenforceable. Employers are required to notify affected workers.
New non-competes signed after the effective date are banned (except for senior executive contracts, which are grandfathered through the effective date).
The senior executive exception applies to a narrow group: policy-making employees earning more than $151,164 per year. For everyone else, the ban is comprehensive.
The rule supersedes state law that's less protective of workers. State laws that are more protective (like California's outright void) remain in effect.

Even if the rule takes effect, the practical impact on existing disputes depends on timing. Cease-and-desist letters issued before the effective date would have been governed by state law as it stood at the time. Litigation pending at the effective date would have to address whether the rule applies retroactively to existing cases.

What to do regardless of the rule

Whether the FTC rule ultimately takes effect or not, three things are true for most workers right now:

State law is the primary protection. California, North Dakota, Oklahoma, and Minnesota already void most employee non-competes. Several others apply meaningful restrictions. Knowing your state's law is the highest-value step.
Most non-competes don't survive a reasonableness challenge. Even in jurisdictions that enforce them, overbroad agreements often get blue-penciled or voided. Fear of enforcement does most of the enforcement work.
The procedural and consideration requirements are often violated. Agreements signed without proper notice, without garden leave where required, or without additional consideration mid-employment, are vulnerable.

If you're sitting under a non-compete and waiting for the FTC rule to resolve, you may be waiting longer than you need to. A specific analysis of your agreement against your state's current law is usually more actionable than holding for federal change.

What to do next

If you want a delivered analysis of your non-compete, with current FTC rule status, state-law citations, and a clear verdict per clause, we deliver one in 24 hours for $199. See Non-Compete Review.

Sources

FTC Non-Compete Rule, 16 CFR Part 910 (April 2024)
Ryan LLC v. FTC, N.D. Tex., Aug. 20, 2024
ATS Tree Services v. FTC, E.D. Pa., July 23, 2024
FTC Section 6(g), 15 USC § 46(g)
NLRB General Counsel Memo GC 23-08 (May 2023) on non-competes

Get your contract reviewed

If you want a delivered review of your specific document with cited authority and counter language, see https://trycounteroffer.com/non-compete.

Last updated: Sun May 31 2026 00:00:00 GMT+0000 (Coordinated Universal Time)

Counteroffer is a contract analysis service, not a law firm. This page is informational, not legal advice.