The Federal FTC Non-Compete Rule: Where It Stands

Is there a federal ban on non-competes in 2026?

The FTC issued a rule in 2024 that would have banned most employee non-competes nationwide, but a federal court set it aside before its effective date, the FTC then acceded to that vacatur, and the Commission conformed the CFR to the court's order by striking the rule from the books.

“this final rule removes the Non-Compete Rule codified at 16 CFR part 910 from the Code of Federal Regulations”

Because there is no federal overlay, enforceability turns entirely on the law of the state whose law governs the covenant — which ranges from near-total bans (for example, California) to the reasonableness tests applied in most states. Start with the U.S. non-compete practice guide for how those rules fit together.

What would the FTC's 2024 Non-Compete Rule have done?

The FTC published the Non-Compete Rule (16 CFR part 910) on May 7, 2024. Its operative prohibition swept broadly, reaching the making, enforcing, and even the assertion of a non-compete against most workers.

“it is an unfair method of competition for a person to enter into or attempt to enter into a non-compete clause; to enforce or attempt to enforce a non-compete clause; or to represent that the worker is subject to a non-compete clause.”

The rule treated existing non-competes with senior executives differently from those with other workers, but for the vast majority of employees it would have rendered both new and existing non-competes unenforceable. It never took effect for the reasons in the next question.

Why did the rule never take effect?

The court reached the merits on cross-motions for summary judgment and ruled that the FTC Act does not empower the Commission to promulgate substantive rules defining unfair methods of competition.

“In sum, the Court concludes that the FTC lacks statutory authority to promulgate the Non- Compete Rule, and that the Rule is arbitrary and capricious.”

Having found the rule unlawful, the court set it aside under the Administrative Procedure Act, with nationwide effect rather than relief limited to the plaintiffs.

“The Non-Compete Rule, 16 C.F.R. § 910.1–.6, is hereby SET ASIDE and shall not be enforced or otherwise take effect on September 4, 2024, or thereafter.”

The vacatur removed the federal rule as a nationwide overlay, but it did not change any state's substantive law. Overbroad covenants still rise or fall under state doctrine — including the different ways courts narrow or refuse to narrow an overbroad non-compete.

Did the FTC appeal the ruling, or could the rule come back?

The Commission had appealed the Ryan vacatur (and a parallel Eleventh Circuit case) under the prior administration. Under Chairman Andrew Ferguson, it reversed course.

“The Commission voted 3-1 to dismiss the appeal and accede to the vacatur.”

That vote ended the litigation over the rule and set up the ministerial removal of the rule from the CFR that followed in February 2026. Any future federal restriction on non-competes would have to come from a new rulemaking or from Congress.

Can the FTC still challenge non-competes without a rule?

Losing the rule did not end federal scrutiny of non-competes; it changed the FTC's tool from a blanket rule to case-by-case enforcement.

“The Federal Trade Commission today ordered Rollins, Inc.—one of the largest pest-control companies in the United States—to stop enforcing noncompete agreements against more than 18,000 employees nationwide.”

Alongside the Rollins order, the Commission warned other employers and brought similar actions, signaling that an aggressive non-compete can still draw federal attention even with no rule on the books. For employers and workers, though, the operative law remains the state-by-state framework.