The Federal Trade Commission’s Noncompete Rule adopted in April of 2024 has officially been abandoned by the current administration, returning the right to have employees work under noncompete agreements.
For some case history, last year the Biden Administration’s FTC decided nearly all noncompete agreements were banned across the country. The decision was immediately appealed, and by August of 2024 an appeals court in Texas ruled the Biden FTC’s rule was illegal in its entirety. The Biden administration immediately appealed that decision, but it was not heard by a higher court.
On September 5, 2026, the Trump Administration’s FTC decided there was no need to push forward with the appeal, and is letting the Texas appeals court decision stand, which will once again allow noncompete agreements to exist. The FTC says it does not want to have a wide-ranging policy on noncompete agreements, and will work toward case-by-case decisions.
Currently nine states (California, Colorado, Illinois, North Dakota, Oklahoma, Massachusetts, Oregon, Minnesota and Washington) and Washington, D.C. have either bans or heavy restrictions on noncompete clauses. Companies in those states rely on covenant agreements.
In their decision statement, FTC Chair Andrew N. Ferguson and Commissioner Melissa Holyoak said the Biden Administration ruling, “preempted the laws of all fifty States, and actively displaced hundreds of existing laws across forty-six states. It redistributed nearly a half trillion dollars of wealth within the general economy. And it purported to render categorically unlawful a species of contract that has been lawful since the eighteenth century by reimagining a single clause tucked away in an ancillary provision of a century-old statute.”
Ferguson continued by saying, “Commissioner Holyoak and I warned our Democrat colleagues at great length that the Rule was unlawful six ways from Sunday; that the Rule would never survive judicial review; and that the resources sunk into the Rule’s promulgation and defense would be wasted. We were ignored. The allure of press junkets and the praise of congressional Democrats was irresistible. And, as predicted, the courts swiftly invalidated the Rule.”