Yes. On August 20, 2024, a federal judge in Texas set aside the Federal Trade Commission’s nationwide Noncompete Rule before it could take effect. The FTC says the rule is not in effect or enforceable. That does not mean every noncompete agreement is automatically valid: the ruling concerned the FTC’s federal rule, while an individual agreement’s enforceability can depend on applicable state law and the contract’s facts.
What the court decided
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 business-group intervenors, denied the FTC’s cross-motion, and set aside the rule under the Administrative Procedure Act. The court held that the FTC lacked statutory authority to issue the rule and that the rule was arbitrary and capricious.
Judge Brown wrote that the rule was “unreasonably overbroad without a reasonable explanation.” The opinion also said the FTC “lacks statutory authority to promulgate the Non-Compete Rule.” Those are the court’s conclusions, not a ruling that all noncompetes are lawful.
Is the FTC’s noncompete ban in effect now?
No. The FTC’s current Noncompete Rule page says the rule “is not in effect and it is not enforceable.” The district court stopped enforcement on August 20, 2024, before the rule’s scheduled September 4, 2024 effective date.
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The FTC reports that it appealed on October 18, 2024, and took steps on September 5, 2025, to dismiss its appeal in the Fifth Circuit. The agency’s page reports those steps; it does not establish a separate final appellate judgment. The district court’s order is the basis for saying the rule was set aside.
What the rule would have done
The rule was adopted in April 2024, but never took effect. Its provisions should therefore be understood as what the FTC rule would have required—not as current federal restrictions.
New agreements
The rule would have barred employers from entering into new noncompetes with workers, including senior executives. The FTC defined a noncompete clause broadly as an employment term that prohibits, penalizes, or functions to prevent a worker from seeking or accepting later work in the United States or operating a business there after leaving a job.
Existing agreements
The rule treated existing agreements differently by worker category. Existing noncompetes for senior executives could have remained in force; existing agreements for other workers would have become unenforceable after the rule’s effective date. Because the rule was set aside before that date, this distinction did not become a nationwide federal requirement.
| Agreement type under the FTC rule | What the rule would have done | What happened |
|---|---|---|
| New noncompetes, including for senior executives | Prohibited employers from entering into them | The rule never took effect |
| Existing senior-executive noncompetes | Could remain in force | The rule never took effect |
| Existing noncompetes for other workers | Would have become unenforceable after the scheduled effective date | The rule never took effect |
Why Judge Brown rejected the rule
The court concluded that the FTC did not have the statutory authority to issue this rule and that its approach was arbitrary and capricious. It criticized the rule as too broad and as taking a “one-size-fits-all approach with no end date.” The court set it aside under the Administrative Procedure Act.
The FTC had argued that the FTC Act authorized it to prevent unfair methods of competition through rulemaking and that its economic analysis supported the final rule. Those were the agency’s arguments; the court did not accept them. The opinion also noted that the FTC rule did not alter state statutes, regulations, or common law.
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What the FTC said the rule might achieve
In its April 23, 2024 announcement, the FTC estimated that about 30 million workers—nearly one in five Americans—were subject to a noncompete. The agency also projected that the rule would increase new business formation by 2.7% annually, resulting in more than 8,500 additional new businesses each year; raise the average worker’s earnings by $524 per year; lower health-care costs by up to $194 billion over ten years; and produce 17,000 to 29,000 additional patents per year for ten years.
These were FTC estimates and projections, not results observed after implementation. The rule did not take effect. The agency presented the ban as a way to give workers more freedom to change jobs, start businesses, or bring ideas to market; Chair Lina M. Khan described those aims in the announcement.
The FTC also cited research indicating that more than 95% of workers with a noncompete already had a nondisclosure agreement. The agency identified trade-secret laws and NDAs as ways employers could protect sensitive information, and better wages and working conditions as ways to retain workers. These were alternatives the FTC discussed, not requirements imposed by the court.
What this means if you have a noncompete
The federal rule’s defeat does not answer whether a particular agreement can be enforced. The court ruling addressed the FTC’s rule, not every contract or the law in every state. The relevant state law and the terms and circumstances of a specific agreement can matter.
Quick Recap
- Do not assume the FTC rule automatically voided your agreement; it never took effect.
- Do not assume the Texas court ruling makes every noncompete enforceable nationwide.
- For a contract-specific answer, consult a qualified employment-law attorney in the relevant jurisdiction.
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