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The FTC’s nationwide rule banning most noncompete agreements is not in effect or enforceable, according to the agency. On August 20, 2024, a federal judge in Texas ruled against the rule, finding that the FTC exceeded its statutory authority and acted arbitrarily and capriciously. The decision concerns the FTC’s federal rule—not whether a particular noncompete can be enforced under state law.
What did the Texas judge decide?
In Ryan LLC v. Federal Trade Commission, U.S. District Judge Ada Brown of the Northern District of Texas granted summary judgment to Ryan LLC and the plaintiff-intervenors on August 20, 2024. The court concluded that the FTC lacked statutory authority to issue the Non-Compete Rule and that the rule was arbitrary and capricious under the Administrative Procedure Act. Read the court opinion.
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The FTC had argued that Congress authorized it to address unfair methods of competition through rulemaking. Judge Brown rejected that argument as a legal basis for this rule. The ruling addressed the Commission’s authority to make this broad federal regulation; it did not decide the validity of every noncompete agreement.
Are noncompete agreements banned now?
No nationwide ban under the FTC rule is currently in effect. The FTC’s rule status page says the rule is not in effect and is not enforceable. That answers whether the FTC’s rule currently bars employers from using noncompetes; it does not settle whether a specific agreement is valid under the law that applies to it.
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The procedural history matters: the FTC appealed the district court ruling on October 18, 2024. On September 5, 2025, the Commission announced that it had voted 3–1 to dismiss its Fifth Circuit appeal and accede to vacatur, and said it would take steps to dismiss the appeal. The agency’s status page reflects those developments. The FTC’s announcement describes its action; it is not a basis for asserting a more specific later appellate-court docket order. See the FTC’s September 2025 announcement.
What the FTC rule would have prohibited
The FTC’s final rule would have barred employers from entering into new noncompetes with workers, including senior executives. It treated existing agreements with senior executives differently from existing agreements with other workers, and required notice for certain existing agreements. The FTC announced the final rule in April 2024, but these provisions did not become an enforceable nationwide ban.
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The rule defined a noncompete broadly: an employment term or condition that prohibits, penalizes, or functions to prevent a worker from seeking or accepting work with another person in the United States, or from operating a business, after the employment ends. It also included an exception for certain clauses entered into as part of a bona fide sale of a business, among other provisions. Those descriptions explain the rule’s scope; they do not determine whether a particular contract clause qualifies. See the FTC rule page and its April 2024 announcement.
What the ruling means for workers and employers
The ruling is about the FTC’s federal regulation, not a blanket ruling that noncompetes are lawful or unlawful. The FTC rule text did not generally displace state noncompete law, subject to the rule’s terms. State statutes, regulations, common law, and the facts and wording of an individual agreement can affect the answer.
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- If you are a worker: Do not assume that the federal rule voided a noncompete in your contract. The relevant state law and the agreement’s terms matter.
- If you are an employer: The FTC rule is not currently enforceable, but that does not establish that every noncompete you use is valid. Review applicable state law and the specific agreement.
- If you need an answer about your agreement: Identify the relevant jurisdiction and get advice from a qualified employment lawyer. This federal ruling alone cannot resolve an individual contract question.
How to interpret the FTC’s projected effects
When it announced the rule in 2024, the FTC estimated that about 30 million workers—nearly one in five Americans—were subject to noncompetes. It also projected that the rule could lead to more than 8,500 additional new businesses per year, $524 in additional annual earnings for the average worker, up to $194 billion in lower health care costs over the next decade, and an estimated 17,000 to 29,000 additional patents annually for ten years.
These are projections and estimates attributed to the FTC, not findings by Judge Brown or measured outcomes of an operative rule. The rule did not take effect as an enforceable nationwide ban. Details appear in the FTC’s April 2024 announcement.
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