How the FTC's Nationwide Noncompete Ban Was Struck Down, and What It Means for At-Will Workers

The most ambitious federal attempt in a generation to free workers from noncompete agreements is over, and it ended in court. A rule from the Federal Trade Commission that would have wiped out most noncompete clauses across the country was struck down before it could take effect, the agency walked away from its appeal, and the rule has since been pulled from the books.

For anyone trying to understand how much freedom a worker really has to leave one job and take another, the story matters. It sends the question of noncompete enforceability back to the states, where it had always lived.

Information last verified on June 20, 2026.

What the FTC Rule Would Have Done

The FTC voted 3 to 2 in April 2024 to adopt its Non-Compete Clause Rule, codified at 16 CFR Part 910. The final rule was published in the Federal Register at 89 FR 38342 on May 7, 2024, with an effective date of September 4, 2024.

The rule declared it an unfair method of competition for an employer to enter into or enforce most noncompete clauses. Going forward, no employer could impose a new noncompete on a worker. Existing noncompetes with rank-and-file workers would become unenforceable, and employers would have to notify those workers that the clauses no longer bound them.

The rule carved out a narrow exception. Existing noncompetes with senior executives could remain in force, on the agency's reasoning that this small group faced fewer acute harms. By the FTC's own estimate, roughly 30 million American workers, about one in five, were subject to a noncompete at the time.

The Legal Authority the FTC Claimed

The FTC built its rule on Section 5 of the FTC Act. As codified at 15 U.S.C. 45, that provision declares that "unfair methods of competition in or affecting commerce, and unfair or deceptive acts or practices in or affecting commerce, are hereby declared unlawful."

The agency paired that language with its rulemaking provision in Section 6 of the Act, arguing the combination let it issue a binding substantive rule defining noncompetes as an unfair method of competition. Business groups disagreed sharply, contending that the FTC had never before used those provisions to write economy-wide competition rules and lacked the authority to do so.

That clash over agency power, rather than any dispute about whether noncompetes can be harmful, became the heart of the litigation.

The Court That Set the Rule Aside

The challenge came together quickly in Texas. Ryan LLC, a tax-services firm, sued the FTC, and major business organizations including the U.S. Chamber of Commerce intervened as plaintiffs.

On August 20, 2024, the U.S. District Court for the Northern District of Texas issued a memorandum opinion and order in Ryan LLC v. Federal Trade Commission, No. 3:24-CV-00986, granting summary judgment to the challengers and denying the FTC's cross-motion. As reflected in the court's docket and order, the court held that the FTC exceeded its statutory authority in promulgating the rule and that the rule was arbitrary and capricious under the Administrative Procedure Act because it was unreasonably overbroad and rested on flawed evidence.

The court set aside the Non-Compete Rule and ordered that it "shall not be enforced or otherwise take effect." Unlike the more limited preliminary injunction the same court had entered in July 2024, the August final judgment applied with nationwide effect, not just to the parties.

How the Appeal Ended

The FTC did not immediately give up. The Commission appealed the decisions striking the rule, taking the Ryan judgment to the U.S. Court of Appeals for the Fifth Circuit and a related preliminary injunction to the Eleventh Circuit, and briefed the case into 2025.

Then the agency reversed course. On September 5, 2025, a reconstituted Commission voted 3 to 1 to dismiss both appeals and to accede to vacatur of the rule, as the FTC explained in its official statement on acceding to vacatur. The appellate courts dismissed the appeals shortly afterward.

The FTC said it would instead police abusive noncompetes case by case, through targeted enforcement, rather than through a blanket rule. With the appeals gone and the vacatur accepted, the FTC then moved to clean up the books: in a Federal Register notice published February 12, 2026, the agency removed the Non-Compete Rule from the Code of Federal Regulations to conform 16 CFR Part 910 to the federal court decisions.

Back to State Law, and Back to At-Will Basics

The collapse of the federal rule returns the entire question of noncompete enforceability to the states, and the states do not agree. A handful, such as California, void most noncompetes outright. Many others enforce noncompetes that a court finds reasonable in scope, geography, and duration. Still others have passed wage thresholds below which noncompetes cannot be enforced.

That patchwork sits on top of the default rule that governs most American jobs, which is at-will employment. You can see how that baseline works in our overview of at-will employment law in the United States, which explains that absent a contract or a recognized exception, either side can end the relationship at any time, for almost any reason.

The noncompete and the at-will rule interact in a way workers often misunderstand. At-will means the employer can usually let you go without cause, but it does not erase a noncompete you signed. Depending on your state, that clause may still restrict where you work next even after an at-will termination.

State-by-state guides show how different the answers are. Our pages on Iowa at-will employment law, Ohio at-will employment law, and Utah at-will employment law lay out how each state treats the at-will default and the contractual exceptions that can sit on top of it.

Analysis: Why This Matters

The following analysis reflects the views of the Recording Law Editorial Team.

The demise of the FTC rule is less a verdict on noncompetes than a verdict on who gets to regulate them. The Texas court did not say noncompetes are good policy. It said an independent agency could not, on the authority it cited, rewrite the rules of the labor market for the whole country in a single rulemaking. That is a separation-of-powers conclusion, and it fits a broader judicial skepticism toward expansive agency action.

For workers, the practical takeaway is that the ground did not actually shift. Many employees who heard about the 2024 ban assumed their noncompetes had already evaporated. They had not. The rule never took effect, so the only law that ever bound a given worker was, and remains, the law of that worker's state.

That makes the state-level picture the one to watch. Because Washington could not impose a national answer, the action moves to legislatures and courts in individual states, several of which have tightened their own noncompete rules in recent years. Expect continued state-by-state movement rather than another sweeping federal rule in the near term.

None of this is legal advice. Whether a particular noncompete is enforceable, and how it interacts with an at-will termination, depends on the contract's wording and the law of the relevant state. Anyone weighing a job change against a signed noncompete should consult a licensed attorney in their state before acting.