Update, October 2026: On August 20, 2024, a federal court in Texas set aside the FTC's noncompete rule nationwide. In September 2025 the FTC dropped its appeals, and in February 2026 it formally removed the rule. The rule never took effect. Texas law on non-competes still applies.
In April 2024, the Federal Trade Commission announced a rule banning noncompete agreements, triggering swift legal challenges. Within hours, multiple lawsuits were filed claiming the rule exceeds the FTC’s authority.
What is the Noncompete Ban?
The FTC issued the final rule with aims to promote competition, protect workers’ freedom to change jobs, and stimulate business formation. The rule defines a “non-compete clause” as “a term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent a worker from (1) seeking or accepting work in the United States with a different person where such work would begin after the conclusion of the employment that includes the term or condition; or (2) operating a business in the United States after the conclusion of the employment that includes the term or condition.” The final rule further provides that the “term or condition of employment” includes, but is not limited to, a contractual term or workplace policy, whether written or oral.
The FTC rule was set to take effect 120 days after its publication in the Federal Register, on September 4, 2024. In the meantime, the federal court has begun to hear arguments from both sides regarding the legality and implications of the FTC's rule.
Lawsuits Challenging the Rule
The lawsuits challenge the FTC's authority to regulate noncompete agreements, arguing that such regulation exceeds the agency's mandate and could set a precedent for broader regulatory overreach. The plaintiffs contend that noncompete agreements serve legitimate business interests, such as protecting trade secrets and investments in employee training, and that banning them could disrupt established business practices across various industries.
On the other side, proponents of banning noncompete agreements argue that such contracts stifle job mobility, depress wages, and inhibit entrepreneurship and innovation. They assert that workers should have the freedom to seek new opportunities without artificial constraints imposed by their previous employers.
On July 3, 2024, a federal court in Texas granted a preliminary injunction requested by Ryan LLC and the U.S. Chamber of Commerce, blocking the FTC from enforcing the rule against the plaintiffs while the case proceeds. The court said it expected to rule on the merits by August 30, 2024, and it declined for now to extend the injunction beyond the plaintiffs.
What About Existing Noncompete Agreements?
As the legal proceedings unfold, individuals with existing noncompete agreements are left in a state of uncertainty. If the FTC rule had been upheld, most existing noncompetes would have become unenforceable. The rule made exceptions for existing agreements with senior executives (policy-makers earning at least $151,164 a year) and for noncompetes signed as part of a bona fide sale of a business.
In the interim period before the rule takes effect, affected parties—including businesses, employees, and legal experts—are closely monitoring developments. The outcome of these lawsuits will likely have far-reaching implications for employment practices, business competition, and regulatory authority in the United States.
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Ryan LLC v. FTC: Intervention in challenge to FTC Noncompete Rule banning noncompete agreements nationwide (July 2024) https://www.uschamber.com/cases/antitrust-and-competition-law/ryan-llc-v.-ftc
FTC Non-Compete Clause Final Rule https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete-rule.pdf
This article is general information as of the date shown above, not legal advice for any particular situation. The law can change after an article is written.
Law Clerk, Peters Kussmaul Crosier PLLC
