In April 2024, the Federal Trade Commission issued a sweeping final rule that would have banned virtually all non-compete agreements nationwide. By August 2024, a federal district court in Texas had blocked it. By September 2025, the FTC had dismissed its own appeal. And in February 2026, the agency formally removed the rule from the Code of Federal Regulations — the administrative equivalent of acknowledging it's over.
The blanket ban is dead. Non-compete agreements are alive. And what governs them now is what governed them before: a patchwork of state laws that ranges from total prohibition to a presumption of enforceability, with most states falling somewhere in between.
For small businesses, this isn't a return to normal. The legal attention the FTC's rulemaking generated has accelerated state-level activity. Multiple states tightened their non-compete laws during the period the federal ban was under litigation, and several others have bills pending. The landscape is more fragmented, not less, than it was before the FTC acted.
The Current State-Law Spectrum
At one end, several states effectively ban most non-competes. California has prohibited them since 1872 — long before anyone was discussing federal action. Minnesota, North Dakota, and Oklahoma also broadly prohibit post-employment non-compete agreements, with narrow exceptions. In these states, a non-compete clause in an employment agreement is unenforceable regardless of how carefully it's drafted.
At the other end, states like Florida and Kansas have enacted statutes creating a presumption of enforceability for non-compete agreements that meet specified criteria — reasonable time period, reasonable geographic scope, protection of a legitimate business interest. In these states, a well-drafted non-compete is not just enforceable but presumptively valid, shifting the burden to the employee to prove it's unreasonable.
Most states fall between these poles. They'll enforce a non-compete if it's reasonable in scope, duration, and geographic reach, protects a legitimate business interest (trade secrets, customer relationships, specialized training), and doesn't impose an undue hardship on the employee. “Reasonable” is interpreted by courts on a case-by-case basis, which means enforceability depends as much on how a judge reads the facts as on what the contract says.
The FTC Isn't Done
The categorical ban failed, but the FTC retains authority under Section 5 of the FTC Act to challenge specific non-compete agreements it considers unfair methods of competition — on a case-by-case basis rather than by rule. The agency has signaled clearly that it intends to use this authority.
In 2025, the FTC finalized a consent order against Rollins, Inc. (the parent company of Orkin), requiring the company to release approximately 18,000 employees from non-compete agreements the agency considered anticompetitive. The Rollins agreements applied to nearly all employees regardless of position, seniority, or access to confidential information — the kind of broad, blanket non-compete that courts and regulators have increasingly found indefensible.
The Rollins case illustrates the FTC's current enforcement posture: it's not challenging non-competes that protect genuine trade secrets or customer relationships for senior employees. It's targeting agreements that restrict low-wage or mid-level workers from taking a job at a competitor, where the company can't articulate a legitimate business interest beyond “we don't want them to leave.”
What Actually Protects Your Business
For most small businesses, the question isn't whether non-competes are legal — in most states they are, if drafted properly. The question is whether a non-compete is the right tool for what you're actually trying to protect, and whether it would survive a challenge if tested.
Non-disclosure agreements protect confidential information — pricing, customer lists, proprietary processes, business strategies — without restricting where someone can work. They're enforceable in virtually every state because they restrict what information can be used, not what jobs can be taken. For most small businesses, the information is what matters, not the employment restriction.
Non-solicitation agreements prevent a departing employee from actively soliciting your customers or recruiting your other employees for a specified period. They're narrower than non-competes and more likely to be enforced because they target a specific competitive harm rather than imposing a blanket employment restriction.
Garden leave clauses pay the employee during the non-compete period — the company continues salary in exchange for the restriction. Courts are substantially more willing to enforce a restriction that comes with continued compensation than one that simply prevents someone from earning a living. For a key employee who genuinely has access to competitive intelligence worth protecting, a funded restriction is both fairer and more defensible than an unfunded one.
How to Evaluate Your Current Agreements
If your business currently uses non-compete agreements, a practical review against the current landscape includes three questions.
First, does the agreement protect a legitimate business interest that can be articulated specifically — not “they know how we do things,” but “they have access to our customer pricing database and our product development roadmap”? Courts increasingly require specificity about what's being protected, and vague or overbroad justifications weaken enforceability.
Second, is the restriction proportionate to the interest? A two-year nationwide restriction for a regional sales representative is disproportionate in most courts' analysis. A six-month restriction within the territory the employee actually served is more likely to survive scrutiny. Duration, geographic scope, and the scope of restricted activities all need to match the actual competitive risk, not the company's preference for maximum protection.
Third, does the agreement comply with the law of the state where the employee works — which may not be the state where the company is incorporated or headquartered? Choice-of-law clauses don't always control, and courts in employee-friendly states may apply their own law regardless of what the contract specifies.
The Bottom Line
The federal non-compete ban's failure didn't return the landscape to a stable baseline. It left a patchwork that's more fragmented and more actively evolving than it was before the FTC's rulemaking focused national attention on the issue. For small businesses, the practical path forward is to understand your state's rules, evaluate whether your current agreements would survive scrutiny under those rules, and consider whether narrower protections — NDAs, non-solicitation, garden leave — accomplish what you actually need without the enforceability risk that broad non-competes increasingly carry.
This article is for educational purposes only and does not constitute legal, tax, or financial advice. Consult a qualified professional for guidance specific to your situation.