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Non-Compete Agreements in 2026: What Is Enforceable After the FTC Rule Fell

Updated October 21, 2026 · By the VeriAdvisor editors

In April 2024 the Federal Trade Commission announced a rule that would have banned most employment non-compete agreements nationwide. It never took effect. A federal court set it aside, and in September 2025 the FTC gave up its appeals. As of October 2026, whether a non-compete can be enforced against you depends almost entirely on state law, and state law is changing fast: some states ban these agreements, some are tightening them, and at least one has gone the other way. This guide explains what happened to the federal rule, how the picture looks in several states, and what to check before you sign or when you are asked to honor one. It is general information, not legal advice. Non-compete disputes are fact-heavy, so consult a licensed employment attorney before acting on one.

What happened to the FTC rule

The FTC's Non-Compete Clause Rule was codified at 16 CFR Part 910. On August 20, 2024, a federal district court in Texas in Ryan, LLC v. FTC held that the FTC lacked authority to issue the rule and set it aside nationwide. The FTC appealed to the Fifth Circuit (No. 24-10951). On September 5, 2025, the Commission voted 3-1 to dismiss its appeals in that case and in Properties of the Villages v. FTC (11th Cir.) and to accede to the vacatur, as the FTC's press release states. The agency's rulemaking page also lists a February 12, 2026 action removing the Non-Compete Rule from the Code of Federal Regulations to conform to the court decisions.

That does not mean the FTC has abandoned the subject. Public reporting describes warning letters sent in September 2025 to health care employers and staffing firms about overbroad non-competes, and commentary indicates the agency intends to pursue case-by-case enforcement under the antitrust laws. I could not confirm the details of any specific 2026 enforcement action, so the safest statement is that a federal ban does not exist, while the FTC may challenge particularly abusive agreements individually.

The default rule: reasonableness

In most states, a non-compete is enforceable only if it protects a legitimate business interest (such as trade secrets, confidential information, or substantial customer relationships) and is reasonable in duration, geographic scope, and the activities restricted. Courts differ on how much they will rewrite an overbroad clause. Some "blue pencil" it to a reasonable scope, some refuse to enforce it at all. Agreements that are narrower than a non-compete, such as non-solicitation of customers or employees and confidentiality clauses, are treated more leniently almost everywhere.

State snapshot

Read Minnesota Statutes 181.988 and Washington's RCW 49.62 directly if you are in those states. Note that many agreements include a choice-of-law clause that picks another state's law. Several states, including California and Minnesota, restrict an employer's ability to evade local protections that way, but outcomes vary, and the fight over which state's law applies is often the first battle in a case.

Before you sign

1. Read the restrictions closely. What activities, which competitors, how long, and what area? A one-year restriction limited to your own customers is very different from a two-year ban on working anywhere in an industry.
2. Look for related clauses: non-solicitation, confidentiality, invention assignment (invention assignment carve-out checker), "stay or pay" repayment terms, and attorneys' fee shifting.
3. Find out what you get in return. Many states require consideration beyond continued employment, and a few set earnings thresholds. Check the non-compete enforceability checker for a quick screen.
4. Ask for changes. Shorter duration, narrower scope, carve-outs for your known clients, and a clause that the restriction ends if you are laid off without cause are all common requests.
5. Get time to review. Some state laws require advance notice or a review period (Florida's CHOICE Act requires at least seven days for covered agreements).

If you already signed and want to leave

• Find out whether it is enforceable where you live and work. Do not rely on the label. A void clause in California or Minnesota may still sit in your contract.
• Look at who is asking. Employers often send a reminder letter when they have little intention of suing. But some do sue, and a preliminary injunction can arrive within days, so do not ignore a demand.
• Consider the new job's risk. New employers often will not hire someone who faces a credible threat. Some agree to indemnify the worker or ask a lawyer to review.
• Do not take files. Even where a non-compete is void, trade secret laws and confidentiality agreements remain enforceable, and taking customer lists or documents is the most common reason employees lose.
• Negotiate a release. A written release or narrowed scope before your last day is often the cheapest solution. Severance agreements can contain new restrictions, so read them closely; the severance package fairness calculator helps with the economics.

How these disputes usually unfold

Most non-compete disputes never reach a final trial. The typical sequence is a cease-and-desist letter to you and sometimes to your new employer, followed (if the employer is serious) by a request for a temporary restraining order or preliminary injunction. The court decides quickly, often within weeks, whether the employer is likely to win and whether it would suffer harm that money cannot fix. That early ruling usually decides the practical outcome, because an injunction can keep you out of the new job while the case drags on, and a denial often leads to a settlement.

Money matters too. Some agreements require the employee to pay the employer's attorney's fees if the employer wins, while a few statutes, such as Minnesota's, let an employee recover reasonable fees when enforcing rights under the ban. Before you leave, ask a lawyer to estimate both the odds and the cost, and compare them with the value of the new position. Keep copies of your signed agreement, offer letter, handbook acknowledgments, and any emails that show what the employer promised you in exchange for the restriction.

If you are told you are being fired or retaliated against

If you believe you are being punished for refusing to sign or for asserting your rights, keep a timeline of events. The workplace retaliation timeline builder can structure it for a lawyer or agency. For wage issues connected to your departure, see final paycheck laws.

What may change next

Expect continued state-by-state action. Washington's total ban begins June 30, 2027, with an October 1, 2027 deadline for employers to make reasonable efforts to notify affected workers that their covenants are void. Illinois thresholds rise in January 2027. New York remains a state to watch. Because dates and bill numbers move, rely on the official legislature pages, not summaries, and treat any secondary source (including this one) as a starting point. This article is general information and not a substitute for advice from a licensed attorney who knows your state's current law and your contract.

Sources

• Federal Trade Commission: Files to Accede to Vacatur of Non-Compete Clause Rule (September 5, 2025)
• Federal Trade Commission: Noncompete Rule page
• California Business and Professions Code 16600
• Minnesota Statutes 181.988
• Washington RCW chapter 49.62
• Greenberg Traurig: Florida CHOICE Act overview

General legal information, not legal advice. Laws differ by state and change often. Check the official sources linked above, and talk to a licensed attorney or your local legal aid office before you act. Spotted a mistake? Email huhuwen09@gmail.com with the page address and we will check and correct it.