What is the FTC noncompete rule and does it still apply?

The FTC's Non-Compete Clause Rule, finalized April 23, 2024, would have banned most noncompete agreements between employers and workers nationwide, with limited exceptions for senior executives and existing noncompetes tied to a sale of business. It was scheduled to take effect September 4, 2024.

In August 2024, the U.S. District Court for the Northern District of Texas (Ryan LLC v. FTC) issued a nationwide order setting aside the rule, finding the FTC lacked statutory authority to issue substantive competition rules. The rule did not take effect. The FTC appealed to the Fifth Circuit; the status of any further enforcement depends on the appellate outcome and the current administration's enforcement posture.

Practical guidance for small businesses as of 2026: noncompetes remain governed by state law, which varies widely. California, Minnesota, North Dakota, and Oklahoma broadly ban them. New York, Washington, Massachusetts, and Illinois restrict them by income threshold or industry. Most other states enforce reasonable noncompetes (time, geography, scope limited). Always check current state law before drafting or enforcing a noncompete, and watch for renewed federal action — the FTC has signaled interest in case-by-case enforcement even without the rule.