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The Federal Trade Commission’s nationwide Non-Compete Rule is not in effect or enforceable, according to the FTC’s current rule-status page. On August 20, 2024, a federal judge in Texas set the rule aside after ruling that the FTC lacked authority to issue it and that it was arbitrary and capricious. The decision concerns the federal rule; it does not determine whether a particular worker’s noncompete agreement is enforceable.
What the Texas court decided
U.S. District Judge Ada Brown of the Northern District of Texas granted summary judgment to Ryan LLC and intervening business groups in Ryan LLC v. FTC on August 20, 2024. She denied the FTC’s cross-motion and set aside the agency’s Non-Compete Rule.
The court gave two grounds: it concluded that the FTC did not have statutory authority to promulgate this substantive rule and that the rule was arbitrary and capricious. Judge Brown wrote: “The Court concludes that the Rule is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” The opinion is a district-court ruling, not a Supreme Court decision resolving every legal question about noncompetes.
The FTC argued that Congress had authorized it to make substantive rules against unfair methods of competition and that its economic analysis supported the rule. Judge Brown rejected those arguments in this case, finding the final rule’s broad, one-size-fits-all approach inadequately explained.
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Where the rule stands now
The FTC appealed the district-court ruling on October 18, 2024. On September 5, 2025, the agency said it had taken steps to dismiss its Fifth Circuit appeal and accede to vacatur; the Commission voted 3-1. The FTC’s rule page, checked October 8, 2026, states that the rule “is not in effect and it is not enforceable.”
That status means the federal rule does not currently impose its proposed nationwide requirements on employers. It does not answer whether an individual agreement can be enforced. The federal rule’s status and a private contract’s enforceability are separate questions; the cited court decision and FTC status page do not assess any particular contract or state-law restriction.
What the rule would have required
The FTC announced its final rule on April 23, 2024. It would have treated a noncompete as an unfair method of competition under Section 5 of the FTC Act. The rule’s definition covered a term or condition of employment that prohibited, penalized, or functioned to prevent a worker from taking other work in the United States or operating a business after leaving a job. It included written or oral contract terms and workplace policies.
| Situation under the proposed rule | What it would have done |
|---|---|
| New noncompetes | Barred employers from entering into new noncompetes with any worker, including senior executives. |
| Existing agreements with senior executives | Allowed existing agreements to remain in force. |
| Existing agreements with other workers | Made them unenforceable after the rule’s effective date. |
These were the rule’s intended requirements, not current federal obligations: the rule never took effect.
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When it announced the rule in 2024, the FTC estimated that about 30 million workers, nearly one in five Americans, were subject to noncompetes. The agency also said senior executives made up less than 0.75% of workers and cited an estimate that more than 95% of workers with a noncompete already had a nondisclosure agreement.
The FTC projected potential effects if its rule took effect. These are agency forecasts, not measured results:
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| FTC projection announced in 2024 | Attribution and period |
|---|---|
| 2.7% annual growth in business formation, with more than 8,500 additional new businesses a year | FTC projection; annual estimate. |
| $524 in additional annual earnings for the average worker | FTC projection; annual estimate. |
| Up to $194 billion in lower health-care costs | FTC projection over ten years. |
| 17,000 to 29,000 additional patents | FTC projection per year for ten years. |
Because the rule did not take effect, those sources do not establish realized changes in wages, business formation, health-care costs, or patent activity attributable to implementation.
How the case reached the ruling
- April 23, 2024: The FTC announced its final Non-Compete Rule.
- July 3, 2024: The Texas district court preliminarily enjoined implementation and enforcement as to the named plaintiffs.
- August 20, 2024: The court granted summary judgment to the plaintiffs and set the rule aside.
- October 18, 2024: The FTC appealed the district-court decision.
- September 5, 2025: The FTC said it took steps to dismiss its Fifth Circuit appeal and accede to vacatur.
What workers and employers should take from the decision
The ruling answers a narrow but important question: the FTC’s proposed federal ban is not enforceable. It does not settle the status of every noncompete, and the FTC rule’s prior announcement should not be mistaken for a current federal prohibition. Whether a particular clause applies remains dependent on the agreement and the relevant legal circumstances; the sources cited here do not evaluate individual contracts.
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