In 2024, the Federal Trade Commission finalized a rule that would have banned  non-compete agreements, a sweeping move that employment lawyers called one of the most significant labor market interventions in decades. However, a federal district court in Texas set aside the FTC's rule before effect, ruling in 2024 that the agency lacked the statutory authority to issue a regulation this broad, and that the rule itself was "arbitrary and capricious."

The FTC initially appealed the ruling, keeping the possibility of of a federal ban alive. That changed in September 2025, when the Commission, under new leadership, voted 3 to 1 to drop the appeals entirely and accept the court's decision, formally closing the door on the rule. It was removed from the Code of Federal Regulations in February 2026.

This decision doesn't mean non-competes are unregulated. Regulations remain at the state level. California, North Dakota, and Oklahoma essentially ban non-competes outright, regardless of income or role. Most other states allow them under a "reasonableness" standard, evaluating factors like geographic scope, duration, and whether the restriction is genuinely necessary to protect a legitimate business interest. A standard broad enough where outcomes will vary significantly by state, judge, and how resourced the worker challenging the agreement happens to be.

The agency retains authority to challenge specific non-compete practicee on a case by case basis under its general consumer protection powers, and it has used that authority since the rule's collapse. The practical upshot for anyone currently bound by a non-compete, or being asked to sign one, is that the protection you have depends almost entirely on which state you live in.

Workers should check their state's regulations on non-compete agreements before signing anything. An agreement drafted under one state's rules doesn't automatically travel with you if you move for a new job.

There is a broader lesson in how quickly this role and fell that's worth noting. A federal agency rule, even a sweeping one backed by years of comment and research, is only as durable as the courts that review it and the leadership that chooses whether to keep defending it. The FTC's role had real momentum and a change in the agency's priorities unwound it inside roughly eighteen months. Anyone tracking federal rules in the workplace should treat future rulings as provisional until it survives its first legal test as it's not settled upon announcement.