Non-Compete Agreements After the FTC Ban: What Actually Changed

The Headlines Were Wrong

In April 2024, the FTC voted 3-2 to ban most non-compete agreements nationwide. The headlines were immediate: "FTC Bans Non-Competes." "The End of Non-Compete Clauses." "Workers Are Finally Free." Almost every one of those headlines was wrong within six months.

A federal judge in the Northern District of Texas issued a nationwide injunction blocking the rule before it took effect. The rule was vacated in August 2024. In September 2025, the Commission voted 3-1 to drop its appeals. By February 2026, the rule was formally removed from the Code of Federal Regulations. It's gone. The FTC retains authority to challenge specific non-compete practices case by case under Section 5 of the FTC Act, but the blanket ban is dead absent new rulemaking or an act of Congress.

Meanwhile, the state landscape has changed dramatically. Almost nobody has updated their assumptions.

The Actual State-by-State Picture in 2026

Five states ban non-competes outright: California, Minnesota, North Dakota, Oklahoma, and Wyoming. If you work in one of these states, your non-compete is unenforceable regardless of what you signed. California's ban is the oldest and most tested; courts there have voided non-competes since 1872. Minnesota's ban took effect July 1, 2023, and covers agreements signed after that date. Wyoming's ban (SF 107) passed in 2025 and voids non-competes for all employees.

Another 13 states restrict non-competes by income threshold, meaning the agreement is only enforceable if you earn above a certain amount:

• Colorado: unenforceable for workers earning under $123,750 (adjusted annually).
• Illinois: unenforceable under $75,000.
• Maine: unenforceable under $63,840 (tied to 400% of the federal poverty level, updated 2025).
• Maryland: unenforceable under $15/hour or roughly $31,200 annually.
• Oregon: unenforceable under $119,541 (adjusted 2025), limited to 12 months maximum.
• Washington: unenforceable under $116,594 for employees (adjusted annually), $291,486 for contractors.
• Massachusetts: limited to 12 months, requires "garden leave" or other mutually agreed consideration.
• Nevada: unenforceable for hourly employees, limited to one year for salaried workers.
• New Hampshire: unenforceable for hourly and low-wage workers.
• Rhode Island: unenforceable for non-exempt workers under the FLSA.
• Virginia: unenforceable for low-wage workers (under average weekly wage).
• Tennessee: unenforceable under $70,000, effective July 1, 2026.
• Indiana: recent restrictions limiting duration and scope for mid-range earners.

The remaining roughly 32 states still enforce non-competes under traditional "reasonableness" standards. Texas, Florida, Georgia, Ohio, Pennsylvania, and New York all fall into this category, though New York has proposed a ban multiple times and may pass one in a future session.

The map is messy. It was supposed to be simple after the FTC vote. It isn't.

Non-Compete vs. Non-Solicitation vs. NDA

Most people conflate these three. The conflation costs them.

A non-compete says you can't work for a competitor or start a competing business for some period after you leave. This is the agreement states are restricting.

A non-solicitation says you can't actively recruit your former employer's clients or employees for some period after you leave. Most states enforce these more readily than non-competes because they restrict behavior, not employment. You can go work for a competitor; you just can't take the client list with you.

An NDA says you can't share confidential information. NDAs are enforceable virtually everywhere and aren't affected by any state's non-compete ban. Trade secrets, proprietary processes, client data: all still protected.

Here's why this matters. When California banned non-competes, employers pivoted to broader non-solicitation agreements and tighter NDAs. Some of those replacement agreements are functionally identical to non-competes: an NDA defining "confidential information" broadly enough to include "knowledge of client preferences" can prevent you from servicing those clients at a new firm just as effectively. Courts have started scrutinizing these workarounds, but the cases are still working through.

What "Reasonable" Actually Means in Court

In the 34 states that still enforce non-competes, the standard is "reasonableness." Courts evaluate three factors:

• Duration. One year is almost always upheld. Two years gets upheld in most states. Three years or more draws heavy scrutiny. Five years is functionally unenforceable in most jurisdictions.
• Geographic scope. "Within 50 miles of our office" is typically reasonable. "Anywhere in the United States" is suspect unless the employee had a genuinely national role. "Worldwide" gets thrown out in the majority of cases.
• Scope of activity. Restricting you from the specific competitive activity you performed is usually reasonable. Restricting you from working in an entire industry is usually not. "Cannot sell enterprise software to healthcare companies" is narrow. "Cannot work in technology" is absurd.

The combination matters. A one-year, 25-mile, narrowly scoped agreement is almost certainly enforceable. A two-year, nationwide, broadly scoped agreement is probably not. Most non-competes fall somewhere in between, which is why the cases end up in court.

The Enforcement Bluff

Here's a number that should change how you think about non-competes. According to economists Evan Starr, J.J. Prescott, and Norman Bishara, roughly 37 percent of American workers have signed a non-compete at some point. The vast majority have never had the agreement enforced.

Enforcement is expensive. Filing a lawsuit, seeking a temporary restraining order, depositions, expert witnesses: an enforcement action costs an employer $50,000 to $150,000 in legal fees. Most employers won't spend that unless the departing employee is genuinely taking high-value clients, critical trade secrets, or an entire team. For a mid-level employee moving to a competitor, the economics of enforcement rarely make sense.

That doesn't mean you should ignore a non-compete you signed. It means you should understand the difference between an agreement that is legally enforceable and one that your employer would actually spend money to enforce. They aren't the same set.

What to Do if You've Signed One

Sitting on a non-compete and considering a move? Work through these:

1. Read the actual agreement. Most people signed it during onboarding and never looked at it again. Find it. Read every line. Note the duration, geographic scope, definition of "competitive activity," and any garden leave or payment provisions.
2. Check your state's law. California, Minnesota, North Dakota, Oklahoma, Wyoming: unenforceable regardless. Threshold state and you earn below the limit? Same answer. A 15-minute search on your state's attorney general website will tell you where you stand.
3. Evaluate the breadth. Courts throw out overbroad agreements. If yours says "cannot work in any capacity for any competitor worldwide for three years," that is almost certainly unenforceable. "Cannot perform enterprise sales in the Southeast for 12 months" will likely hold up.
4. Consider the enforcement calculus. Are you taking clients, trade secrets, or a team? Your employer has a financial incentive to sue. Individual contributor moving to a similar role without taking proprietary information? The incentive drops sharply.
5. Talk to an employment lawyer before you resign, not after. A one-hour consultation ($200 to $500 in most markets) can tell you whether your specific agreement in your specific state is something to worry about.

What to Negotiate Before You Sign the Next One

If you're offered a job that includes a non-compete, you have more leverage than you think. Employers expect pushback. They don't always get it. Three changes worth asking for:

• Duration. Push for 6 months instead of 12. A year of career restriction is a long time in a hot labor market. Six months is annoying but survivable.
• Garden leave. In Massachusetts, garden leave (the employer continues paying you during the restricted period) is now required for new agreements. Even where it isn't required, asking for it changes the employer's calculus. If they have to pay you not to work, they'll think twice about the duration.
• Narrow scope. Push for the agreement to cover only the specific clients, products, or markets you touch in the role. "Cannot perform the same function for three named competitors" is a different animal than "cannot work in financial services."

Most employers will negotiate at least one of these. Some will drop the non-compete entirely for the right candidate. The worst they can say is no.

Where This Is Heading

The FTC's blanket rule is gone. What's left is case-by-case enforcement under Section 5, which takes years per action and covers only the most egregious uses. The real momentum is at the state level, and it's moving in one direction. Washington passed ESHB 1155, a near-total ban on non-competes that takes effect in June 2027. New York, New Jersey, Pennsylvania, and several others have active bills restricting or banning non-competes. The trend over the next five years is clearly toward more restriction, not less.

In the meantime, the patchwork means the agreement you signed in Texas has a very different legal weight than the identical agreement signed in Colorado. Knowing which state's law applies to yours is not optional anymore. It's the entire question.

For a broader look at business formation and the legal tools that surround it, our LegalZoom vs. Rocket Lawyer comparison covers document review services that can help you evaluate an existing agreement. DocuSign vs. PandaDoc breaks down the contract management platforms where many of these agreements live.