Federal Trade Commission Chairman Andrew Ferguson testifies on Capitol Hill on May 15, 2025 in Washington, D.C. - Kevin Dietsch/Getty Images North America
The Federal Trade Commission formally changed course on its nationwide noncompete rule on September 5, 2025, when the Commission voted 3-1 to dismiss its appeals in two major lawsuits and accept the court-ordered vacatur of the Biden-era regulation.
The decision did not suddenly make tens of millions of employment noncompetes enforceable. The rule had already been blocked nationwide more than a year earlier. On August 20, 2024, a federal district court in Texas set the regulation aside before its planned September 4, 2024 effective date.
The FTC initially appealed that ruling, but under Chairman Andrew Ferguson the agency later abandoned the appeals. In February 2026, the FTC also removed the Non-Compete Clause Rule from the Code of Federal Regulations. As of September 2026, there is no nationwide FTC regulation automatically invalidating most employment noncompetes.
What the FTC Actually Did in September 2025
On September 5, 2025, the FTC announced that it was taking steps to dismiss its appeals in Ryan, LLC v. FTC and Properties of the Villages v. FTC and to accede to the vacatur of the rule. The Commission voted 3-1.
Chairman Andrew Ferguson, Commissioners Melissa Holyoak and Mark Meador supported the decision, while Commissioner Rebecca Kelly Slaughter dissented. Ferguson and Holyoak had opposed the regulation when it was adopted, arguing that the FTC lacked statutory authority to impose such a sweeping nationwide rule.
The Texas federal district court later reached that statutory conclusion and set aside the regulation. The dispute therefore centered primarily on the scope of the FTC's authority under federal law rather than on a court ruling that noncompete restrictions themselves were universally lawful.
The Fifth Circuit dismissed the FTC's Texas appeal on September 8, 2025, and the Eleventh Circuit dismissed the Florida appeal shortly afterward. The FTC provides the current status of the regulation on its official Noncompete Rule page.
What the Biden-Era Rule Would Have Done
The FTC adopted its final Noncompete Rule in April 2024. Had it taken effect, employers generally would have been prohibited from entering into new noncompete agreements with workers, including senior executives.
The treatment of existing agreements would have depended on the worker. Existing noncompetes involving most workers would have become unenforceable, while qualifying existing agreements involving senior executives could have remained in effect.
The FTC defined a senior executive for purposes of the final rule as a worker in a policy-making position earning more than $151,164 annually.
At the time, the agency estimated that nearly 30 million American workers — roughly one in five workers — were subject to noncompete clauses. Because the regulation was set aside before its effective date, those provisions never became a nationwide federal standard.
The Economic Estimates Were Forecasts, Not Realized Benefits
The economic case for the rule was one of the most prominent parts of the debate. When the FTC proposed a broad ban in January 2023, it estimated that eliminating noncompetes could increase worker earnings by nearly $300 billion per year.
The figures changed by the time the final regulation was adopted in April 2024. According to the FTC's final analysis, the rule was projected to increase worker earnings by approximately $400 billion to $488 billion over a decade, with an estimated average increase of about $524 per worker per year.
The FTC also projected that the rate of new business formation could rise by 2.7%, representing more than 8,500 additional businesses each year. The agency projected additional innovation and lower spending on physician services as well.
Those numbers were forecasts based on economic studies and modeling. They were not benefits that had already occurred. Since the nationwide rule never took effect, its projected national impact on wages, business formation and innovation cannot be directly observed.
The FTC's final estimates and methodology are summarized in its official fact sheet on the final rule.
Why Noncompetes Remain a Competition and Labor Issue
Noncompete clauses restrict a worker's ability to take certain jobs or operate competing businesses after leaving an employer. Their economic effects depend on factors including the occupation, labor market, geographic scope, duration and legal environment.
Research considered by the FTC associated noncompetes with lower worker mobility and, in some studies, lower wages. One economic explanation is that workers with fewer opportunities to move between competing employers may have less bargaining power, while employers face less pressure to increase compensation to recruit or retain employees.
Employers offer a different justification. Businesses may use restrictive covenants to protect legitimate interests such as trade secrets, confidential information, customer relationships and investments in specialized training.
That makes the legal question more complicated than whether noncompetes are simply allowed or prohibited. Courts and state legislatures often focus on whether a restriction is necessary, appropriately limited and permitted under the applicable state law.
Noncompetes should also be distinguished from nondisclosure, nonsolicitation, trade-secret and no-hire provisions. These arrangements can have different legal standards even when they appear in the same employment contract.
The FTC Did Not Stop Enforcing Against Noncompetes
Abandoning the nationwide rule did not mean the FTC abandoned noncompete enforcement. Instead, the agency shifted toward challenging specific companies and practices under existing competition laws.
That distinction became clear almost immediately. On September 4, 2025 — one day before announcing its decision to abandon the rule appeals — the FTC took action against Gateway Services, a large pet-cremation company.
The FTC alleged that Gateway imposed one-year nationwide noncompete agreements on nearly all employees. In November 2025, the agency approved a final consent order requiring Gateway to stop enforcing covered agreements. According to the FTC, the order released nearly 1,800 employees from those restrictions.
The agency expanded that case-by-case strategy in 2026. In June, the FTC finalized an order requiring pest-control company Rollins Inc. to stop enforcing noncompete agreements against more than 18,000 employees nationwide.
According to the FTC's complaint, Rollins generally imposed restrictions lasting two years and covering employment in pest control within predetermined geographic areas, typically a 75-mile radius around one of the company's more than 700 U.S. locations.
The FTC's June 2026 final Rollins order illustrates the difference between the two approaches. The abandoned 2024 regulation would have created a nationwide rule applying broadly across employers, while case-by-case enforcement requires the agency to investigate and challenge particular companies or practices.
Healthcare Has Received Particular FTC Attention
Healthcare employers and staffing companies also came under scrutiny after the nationwide rule was abandoned. On September 10, 2025, Ferguson sent warning letters to several large healthcare employers and staffing firms urging them to review their employment agreements for potentially unreasonable noncompete restrictions.
The FTC published a template of its September 2025 healthcare noncompete warning letter.
Healthcare is economically important because restrictions on physician and other professional mobility can affect labor-market competition as well as patients' access to providers. But noncompetes are not limited to healthcare or technology. They appear across industries and at different levels of compensation and seniority.
The policy shift fits into a wider debate about the reach of federal regulation, also discussed in News Fusion 365's earlier coverage as seen in Trump's broader regulatory approach.
State Law Is Now Especially Important
With no nationwide FTC ban in effect, state law remains central to determining whether an employment noncompete is enforceable. The United States therefore has a patchwork of different rules rather than a single nationwide standard.
California broadly treats employment noncompetes as void outside limited statutory exceptions. North Dakota likewise generally invalidates contracts restraining a lawful profession, trade or business, subject to specific exceptions including certain agreements connected with the sale or dissolution of a business.
Minnesota enacted a broad prohibition in 2023. Its statute provides that covered employment noncompetes are generally void and unenforceable, while preserving exceptions for certain agreements involving the sale or dissolution of a business. The law separately distinguishes noncompetes from nondisclosure and nonsolicitation agreements.
Oklahoma uses a different model. Former employees generally may engage in the same or a similar business, but state law permits certain restrictions on directly soliciting established customers of a former employer.
Many other states regulate noncompetes through salary thresholds, limits on particular professions, notice requirements, duration restrictions or reasonableness standards. Some states have also continued changing their laws in recent years.
For businesses operating across multiple jurisdictions, that means an agreement used nationally may need state-by-state review. A provision that is enforceable in one state cannot automatically be assumed to be enforceable in another.
The Court Timeline Is Critical to Understanding What Changed
The legal problems facing the FTC rule began before the Trump administration abandoned its defense.
In July 2021, President Joe Biden issued an executive order encouraging the FTC to consider addressing what the administration viewed as the unfair use of noncompete clauses. The FTC proposed a broad regulation in January 2023 and finalized it in April 2024.
Employers and business groups challenged the rule. On August 20, 2024, U.S. District Judge Ada Brown in Texas granted summary judgment against the FTC, holding that the agency lacked statutory authority to issue the regulation and setting the rule aside. That decision prevented the September 4, 2024 effective date from taking effect nationwide.
The FTC appealed the Texas ruling in October 2024. Following the presidential transition, the agency sought pauses in the litigation before moving in September 2025 to dismiss its major appeals.
The Commission completed the administrative cleanup in February 2026, when it removed the Non-Compete Clause Rule from the Code of Federal Regulations to conform federal regulations to the court decisions.
That chronology matters. The Trump-era FTC did not repeal a nationwide ban that was actively governing employment contracts. The rule had already been judicially set aside before the administration changed, and the later FTC decision ended the agency's attempt to revive it through appeals.
What the Current Approach Means for Employers
The absence of the nationwide rule gives employers more flexibility than the 2024 regulation would have permitted, but it does not mean every noncompete is lawful.
The FTC can still investigate employment restrictions that it believes violate federal competition law. State attorneys general, employees and other private parties may also bring challenges under state statutes, contract law or applicable antitrust rules.
For an employer, the practical questions include where the worker is based, what law governs the contract, what business interest the restriction is intended to protect and whether its duration, geographic reach and scope comply with applicable law.
Businesses may also consider whether narrower protections — such as confidentiality, trade-secret safeguards or appropriately tailored nonsolicitation clauses — can protect legitimate interests without imposing a broad prohibition on working for competitors.
News Fusion 365 has covered related disputes over agency authority and federal regulation in similar regulatory challenges facing federal agencies.
What Workers Need to Know
The disappearance of the FTC's nationwide rule does not automatically answer whether an individual worker's noncompete can be enforced.
The answer may depend on where the worker lives and performs the work, when the agreement was signed, the worker's occupation and compensation, the language of the agreement, and the restriction's duration and geographic scope.
A contract may also include separate confidentiality, trade-secret, nonsolicitation, customer-contact or repayment provisions. Those clauses can remain relevant even in a jurisdiction where a traditional noncompete is unenforceable.
Workers should therefore distinguish between two different questions: whether the FTC's 2024 nationwide rule applies, and whether their specific contract is enforceable under the laws that govern their employment.
The answer to the first question is clear: the nationwide FTC rule is not in effect. The second question remains highly dependent on state law and the individual agreement.
International Comparisons Require Care
Other major economies regulate post-employment restrictions in different ways, so there is no single international model for noncompetes.
Germany's Commercial Code imposes significant requirements on covered post-employment noncompetes. Among other conditions, a binding restriction generally requires the employer to provide compensation during the restricted period equal to at least half of the employee's most recent contractual remuneration. The restriction also may not exceed two years.
France uses a framework shaped significantly by case law and collective agreements. A valid restriction generally must protect a legitimate business interest, be limited in duration and geographic reach, apply to specified activities and provide financial compensation.
The United Kingdom requires a different qualification. The British government announced in 2023 that it intended to introduce a statutory three-month limit on noncompete clauses, but the proposal was not automatically equivalent to an enacted nationwide cap. Any comparison with U.S. law should distinguish between announced policy proposals and legislation actually in force.
Where the Noncompete Debate Stands in 2026
By September 2026, the U.S. noncompete landscape had evolved into a hybrid system.
The FTC's sweeping 2024 nationwide regulation is gone. At the same time, federal scrutiny of particular noncompete and no-hire practices continues. Gateway and Rollins are two major examples: together, the FTC's final orders affected nearly 20,000 workers.
State law is therefore more important than it would have been under the abandoned national rule, while federal competition enforcement remains a separate layer of risk for employers whose restrictions attract FTC scrutiny.
For businesses, the practical challenge is compliance across federal enforcement policy and a changing collection of state laws. For workers, the key question is no longer whether the FTC's nationwide ban applies — it does not — but what the applicable state law and any relevant federal competition rules say about the specific agreement they signed.
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