FTC Non-Compete Ban After the Fifth Circuit: State-by-State Enforcement in 2025 and Beyond
In April 2024, the Federal Trade Commission finalized a rule that would have effectively banned most non-compete agreements for the approximately 30 million American workers covered by them — the most significant federal restriction on employment agreements in modern history. The rule never took effect. In August 2024, the Fifth Circuit Court of Appeals affirmed the Northern District of Texas's nationwide vacatur, holding that the FTC exceeded its statutory authority under Section 6(g) of the FTC Act in promulgating a rule that categorically banned conduct — non-compete agreements — rather than targeting specific unfair practices. The Supreme Court declined to expedite review, and the rule remains vacated as of mid-2026.
The practical result is a return to state law as the exclusive enforcement framework, but not quite to the pre-2024 status quo. The FTC rulemaking process generated enormous attention to non-compete practices, and several states moved to tighten their existing restrictions in the 2023-2025 legislative sessions in anticipation that — or in the wake of the ruling that — federal preemption would not materialize.
The jurisdictions most restrictive of non-competes now include California (complete ban under Business and Professions Code section 16600, reinforced by SB 699 and AB 1076), North Dakota, Oklahoma, and Minnesota, which enacted its own near-total ban effective January 1, 2024. These states will not enforce a non-compete against any covered employee, regardless of where the agreement was signed or where the employer is headquartered.
At the other end of the spectrum, states like Florida (Florida Statute section 542.335), Texas, Georgia, and most of the Southeast continue to enforce non-competes that meet reasonable geographic scope, duration, and legitimate business interest requirements. Florida in particular is notable for its statutory presumption that non-competes of two years or less are reasonable — courts will enforce them unless the employee can rebut that presumption, which reverses the burden from most other states.
The most active litigation arena in 2025-2026 has been in "middle tier" states — those with general enforceability rules but increasingly aggressive judicial scrutiny. New York, which does not have a statutory ban, has seen the Court of Appeals and lower appellate courts apply a heightened legitimate-business-interest test that has voided several agreements that would have been upheld a decade ago. Illinois enacted the Illinois Freedom to Work Act in 2022, banning non-competes for employees earning less than $75,000 annually and imposing a 14-day review period for all others — and courts have begun refusing enforcement where that cooling-off period was not provided.
For multistate employers, the post-FTC landscape demands jurisdiction-specific drafting. A national template non-compete signed in a state with broad enforceability will likely be void as to any employee who works in California, Minnesota, or North Dakota — and courts in those states have been unwilling to enforce even narrowly drafted agreements when the choice-of-law clause purports to apply a more permissive state's law. Employment counsel must advise clients to map their workforce geographically and tailor agreements (or use non-solicitation agreements as the more consistently enforceable alternative) to each location.