Updated Overview of the FTC Non-Compete Rule and Its Current Status

Last Updated: December 2025
Published: June 2024

Note:  Please see our 2026 blog regarding Washington’s New Noncompete Ban (HB 1155) and the “Nonsolicitation” Problem

FTC Non-Compete Rule Update Overview

As our firm had previously discussed, the Federal Trade Commission (“FTC”) issued a final rule in May of 2024 that would have banned most non-compete agreements in the United States. The rule was scheduled to take effect on September 4, 2024, and would have invalidated the vast majority of non-competes for workers across all income levels, including hourly workers and independent contractors.

However, the effect of the new rule was halted shortly thereafter. A federal court in Texas issued an order on August 20, 2024 blocking the FTC from enforcing the rule nationwide. In September 2025, the FTC dismissed its appeal, leaving the injunction in place. As of today, the FTC rule is not enforceable, and non-compete agreements remain governed primarily by state law.

Even so, the structure and content of the rule are still important, because:

• The FTC has announced restrictive covenants remain a priority, so elements of the rule may appear in future rulemaking;
• some states have used it as a model for their own statutes;
• employers had already begun preparing for compliance.

Below is an updated summary reflecting the rule as written, its exceptions, and — most importantly — the fact that it is currently blocked.

Definition of Non-Compete Agreement

Under the FTC’s final rule, a non-compete agreement was defined as any term or condition of employment that prohibits a worker from, penalizes a worker for, or functions to prevent the worker from:

1. Seeking or accepting work with a different employer in the United States after their employment ends; or
2. Starting a business in the United States after their employment ends.

This definition extended well beyond written contract clauses. It could also have included workplace policies, offer letters, verbal agreements, non-disclosure agreements drafted so broadly that they function as non-competes, forfeiture-for-competition clauses, liquidated-damages provisions, and certain training repayment agreements (TRAPs).

Although the rule is currently blocked, this broad functional test remains an important reference point in evaluating whether employment terms could be construed as a de facto non-compete under emerging state laws. Fortunately for employees in Washington and Oregon, both states have already legislated certain restrictions on non-competition agreements, though they are not as broad reaching as the now-blocked FTC rule.

Who Would Have Been Covered

The FTC used an expansive definition of “worker,” including:

• Employees
• Independent contractors
• Interns and externs
• Sole proprietors
• Apprentices
• Volunteers

This broad definition remains relevant for employers revising restrictive-covenant agreements, because many states have recently expanded protections to these worker categories.

Exceptions (As Written in the Final Rule)

1. Senior Executive Exception

Existing non-competes would have remained enforceable for “senior executives,” defined as workers who:

1. Earn at least $151,164 in total annual compensation; and
2. Hold a “policy-making position” with authority to make final decisions affecting a significant aspect of the business.

Examples include CEOs and presidents.

Not included: department heads, managers of divisions, or anyone whose authority is limited to advising rather than making final policy decisions.

Important: Even for senior executives, new non-competes entered after the rule’s effective date would have been banned.

2. Sale of Business Exception

Non-competes entered into as part of a bona fide sale of a business, business entity, or ownership interest were exempt.

This exception remains consistent with state law trends, including Washington (RCW 49.62.10) and Oregon (ORS 653.249).

3. Pre-Existing Lawsuits

4. Good-Faith Basis Exception

Entities Outside the FTC’s Jurisdiction

Even if the rule had gone into effect, it would not have applied to:

• Banks and certain financial institutions
• Entities regulated by the Packers and Stockyards Act
• Certain nonprofit organizations (in a fact-specific analysis)
• Foreign companies and foreign workers, so long as the non-compete restricted only foreign work

Notice Requirement (Now Moot)

• Hand delivery
• Mail
• Email
• Text message

The FTC also published model notice language and multilingual templates.

Since the rule is blocked, employers are not required to send this notice unless a state law requires. However, employers are encouraged to voluntarily specify the enforceability of all such agreements for employee-relations or policy-clarity reasons.

Current Status: Blocked by Federal Court

The Northern District of Texas issued a nationwide injunction preventing the FTC from implementing or enforcing the rule. Since that time, the FTC has withdrawn its appeal, meaning:

• The injunction against the rule remains in force
• The FTC rule has no legal effect at this time
• Non-competes continue to be regulated primarily by state law

Employers should closely track developments in their specific state, as several have expanded or tightened non-compete restrictions independently of the FTC.

Our Non-Competes Attorneys in Vancouver, Washington, Can Help You!

While the FTC attempted to create a sweeping federal ban on non-compete agreements, the rule currently cannot be enforced.

Businesses and workers should continue to look primarily to state law when evaluating the enforceability of non-compete provisions. Again, Oregon and Washington have clear statutory guidelines for the enforceability of non-competition agreements. These statutes offer more protections for employees than are seen in many other states.

Because many states and policymakers are reevaluating restrictive covenants, it remains important to understand the structure of the FTC’s attempted rule, and to consult legal counsel reviewing any such agreements.

For more information about the enforceability of non-compete agreements at the state level, see our other blogs, such as “Is my non-compete enforceable in Washington State?” and “Is my non-compete enforceable in Oregon State?“

If you are an employee wondering about the enforceability of a non-compete agreement or non-competition clause in any agreements between you and your employer or former employer, reach out to the attorneys at Navigate Law Group. We’ll be happy to walk you through the fact-specific analysis.