The FTC Non-Compete Ban: Where It Stands and What It Means for Texas Employers

Where the FTC rule stands today

As of November 2026, there is no federal rule banning non-compete agreements. The sequence that got here:

• April 23, 2024. The FTC voted to adopt the Non-Compete Clause Rule, published in the Federal Register on May 7, 2024 and codified at 16 C.F.R. Part 910. It would have made most existing worker non-competes unenforceable, barred new ones, and required employers to notify workers that their covenants were void. The effective date was September 4, 2024.
• August 20, 2024. In Ryan LLC v. FTC, the United States District Court for the Northern District of Texas held that the FTC lacked statutory authority to issue a substantive rule of this kind and that the rule was arbitrary and capricious, and set it aside with nationwide effect. The rule never took effect.
• September 5, 2025. The Commission voted 3 to 1 to dismiss its appeals in the Fifth Circuit (Ryan) and the Eleventh Circuit (a Florida case, Properties of the Villages) and to accept the vacatur.
• February 12, 2026. The FTC published a final rule removing and reserving 16 C.F.R. Part 910, effective the same day, to conform the Code of Federal Regulations to the court's judgment.

The rule is gone from the books. What remains is the FTC's older, case-by-case authority, discussed below, and state law.

What the rule would have done, and why it matters that it did not

The 2024 rule treated nearly every non-compete between an employer and a worker as an unfair method of competition. It covered employees and independent contractors alike. Existing covenants with senior executives, defined by a compensation threshold and a policy-making role, would have survived; every other existing covenant would have become unenforceable, and no new ones could be signed with anyone. Non-solicitation and confidentiality agreements were not banned outright, but the rule warned that clauses broad enough to function as non-competes would be treated as such.

Because the rule was set aside before its effective date, none of that happened. Employers never had to send the required notices, existing covenants were never voided, and agreements signed in 2024 and 2025 are judged by the same state-law standards as before. An employer that paused enforcement in the summer of 2024 while waiting for September 4 lost nothing legally, although the delay may matter to the facts of any particular dispute.

What governs a Texas non-compete now

Texas law, specifically the Covenants Not to Compete Act, Business and Commerce Code sections 15.50 to 15.52. A covenant is enforceable if it is ancillary to an otherwise enforceable agreement and its time, geographic and activity limits are reasonable; an overbroad covenant is reformed rather than voided. The test, and how courts apply it, is covered in whether a non-compete is enforceable in Texas.

The Texas Legislature has moved in the opposite direction from a ban for most workers while tightening the rules for health care. Senate Bill 1318, effective September 1, 2025, limits physician, dentist, nurse and physician assistant non-competes to one year and five miles with a capped buyout. For everyone else, the 2025 session left the Act's general test unchanged.

What the FTC can still do

Losing the rule did not strip the FTC of its authority under Section 5 of the FTC Act, which prohibits unfair methods of competition. The Commission has said it will pursue non-competes through individual enforcement actions rather than a blanket rule, and it has signaled particular attention to covenants that bind low-wage workers, that are used across an entire workforce without regard to role, or that appear in concentrated industries such as health care.

For a Dallas business, the practical exposure is limited but not zero. An enforcement action is a federal proceeding against the company, separate from any lawsuit the company brings against a former employee in state court. Companies that use non-competes selectively, for employees with real access to confidential information or customer goodwill, and that draft them to the role, are far from the pattern the FTC has described as a priority.

Other states' laws can still reach a Texas employer

The FTC rule would have set a national floor. Without it, the differences between states matter, and they matter most for remote and multi-state workforces. Several states, including California, North Dakota, Oklahoma and Minnesota, refuse to enforce most employee non-competes. Others impose compensation thresholds, notice periods or limits on duration. A covenant that is fine in Texas may be unenforceable, and in some states unlawful to require, for an employee who lives and works in one of those jurisdictions.

A Texas choice-of-law clause helps but does not always control. Courts in a state with a strong public policy against non-competes may apply their own law to a resident employee regardless of what the contract says. Employers with out-of-state staff should treat the covenant's governing law and forum as a drafting question for each hire, not a form field.

What a Texas employer should do with this in 2026

1. Stop relying on the FTC rule for anything. Covenants signed in 2024 and 2025 are not void because of it, and no notice obligation ever arose.
2. Review the company's agreements against section 15.50. The federal fight drew attention to overbroad, one-size-fits-all covenants, and those are also the ones Texas courts reform at the employer's expense; see what happens when a Texas court finds a non-compete too broad.
3. Match covenants to roles. Non-competes for employees with customer goodwill or confidential information; non-solicitation and confidentiality agreements, which Texas also enforces under the Act, for many others; nothing beyond confidentiality for roles where competition poses no real threat.
4. Check where every employee actually sits. Apply that state's rules to anyone outside Texas.
5. Watch for change. The FTC's leadership and priorities shift with administrations, and Congress has considered non-compete legislation more than once. The status described here is current as of November 2026.

Tina Wysk represents employers in non-compete and related employment disputes in Dallas state and federal courts, including the question of which law applies to a particular covenant.