In a seismic shift for U.S. employment law, the FTC Non Compete Rule originally designed to eliminate nearly all non compete agreements nationwide has officially collapsed.
After months of courtroom battles, administrative reversals, and political changes, the Federal Trade Commission formally withdrew its appeals in September 2025, allowing a Texas federal ruling to stand and vacate the rule entirely.
The decision instantly reshaped the legal landscape for both employers and employees, eliminating the possibility of a federal ban and pushing the issue back into the hands of individual states and targeted FTC enforcement actions.
This article breaks down exactly what happened, why the federal ban failed, and what the end of the FTC Non Compete Rule means for your contracts, your business, and your career prospects in 2025 and beyond.
FTC Non Compete Rule: Why the Federal Ban Was Struck Down in Court
The FTC Non-Compete Rule, finalized in April 2024, attempted to:
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Ban all new non-compete agreements for nearly every worker
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Void existing non-competes (except for senior executives) on Sept. 4, 2024
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Re-classify non-competes as an unfair method of competition under Section 5 of the FTC Act
But opponents including the U.S. Chamber of Commerce and several major employers immediately argued that the FTC had overstepped its statutory authority.
Key legal arguments used to defeat the FTC Non Compete Rule:
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Major Questions Doctrine → sweeping economic rules require explicit congressional authorization
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FTC Act limitations → challengers argued Section 5 does not give the FTC power to create such a broad, binding rule
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Administrative overreach → courts questioned whether a federal agency can nullify millions of existing contracts
A federal judge in the Northern District of Texas agreed and ruled that the FTC likely exceeded its authority—effectively killing the nationwide ban.
FTC Non Compete Rule: What the Vacatur Means for Workers and Employers Right Now
With the FTC Non-Compete Rule vacated, the national ban is officially dead.
Here’s what that means in real terms:
1. Existing non competes remain valid
Unless your state law bans or restricts them, your current agreement is still enforceable.
2. New non-competes can still be drafted
Businesses may continue issuing non-competes, except in states that prohibit them.
3. State laws now control everything
The U.S. has returned to a patchwork system where each state’s rules differ dramatically.
4. The FTC will still enforce non competes but selectively
The agency will now target only the most abusive, anti-competitive agreements.
FTC Non-Compete Rule: State-by-State Non-Compete Laws After the Federal Collapse
Because the FTC Non-Compete Rule is no longer active, the U.S. has reverted to widely varying state laws:
States with near-total bans
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California
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Oklahoma
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North Dakota
Your non-compete is almost certainly unenforceable in these states.
States with wage thresholds
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Washington
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Colorado
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Illinois
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Oregon
Non-competes only apply to higher-income workers.
States with strong enforcement
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Florida
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Georgia
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New York (industry-dependent)
These states allow non-competes as long as they are reasonable in duration, scope, and geography.
FTC Non-Compete Rule: How Employers Should Draft Agreements After the Ban Collapse
Because the FTC Non-Compete Rule is no longer a threat, employers must adapt to a more nuanced strategy—one built around state compliance and FTC scrutiny.
Best practices now include:
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Narrowing scope and duration (typically 6–12 months)
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Clearly defining legitimate business interests (trade secrets, proprietary data, goodwill)
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Avoiding overly broad geographic restrictions
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Using alternatives such as non-solicitation and confidentiality clauses
The legal environment now focuses less on whether you can use non-competes, and more on how carefully tailored they are.
FTC Non Compete Rule: The Future of Federal Action and Targeted Enforcement
Even though the ban failed, the FTC is not backing down.
In September 2025, regulators filed a new enforcement action against a pet cremation company using overly broad, nationwide non-competes for low-wage employees—highlighting the agency’s new strategy.
Expect the FTC to continue pursuing:
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Overly broad agreements
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Contracts with no legitimate business justification
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Non-competes used for low-wage or non-sensitive roles
This case-by-case approach may become the new de facto federal standard.
FTC Non Compete Rule: What Workers Should Do Now
If you’re a worker in the U.S., here’s how to protect yourself:
✔ Check your state’s current non-compete laws
This determines your rights—not the now-defunct federal rule.
✔ Review your contract’s language
Is it overly broad? Does it restrict you in roles unrelated to your job?
Such clauses are more vulnerable to challenge.
✔ Seek legal advice before switching jobs
Especially in states where courts enforce non-competes strictly.
FTC Non-Compete Rule: The Bottom Line
The collapse of the FTC Non-Compete Rule marks one of the most significant regulatory reversals in recent U.S. labor history.
Today’s landscape is defined by:
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State control, not federal
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Targeted enforcement, not blanket bans
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Reasonableness, not prohibition
Workers and employers alike must now navigate a fragmented, evolving legal environment shaped more by state policies and individual court decisions than federal regulation.
FAQ
1. Is the FTC Non Compete Rule still going into effect?
No. The rule has been officially vacated and will not take effect nationwide.
2. Are non compete agreements still legal in the U.S.?
Yes—depending on your state’s laws. Some states ban them, others enforce them.
3. Does my old non compete still apply?
Yes, unless your state restricts or invalidates such agreements.
4. Can employers create new non competes after the rule was overturned?
Yes, except in states with statutory bans.
5. Why was the FTC Non Compete Rule struck down?
A federal judge ruled that the FTC exceeded its authority, invoking the Major Questions Doctrine.
6. Will there be another attempt to ban non competes nationwide?
Possibly but any future effort will require explicit congressional authorization.