What Happened

For the past couple of years, non-compete agreements have been in legal limbo. But that uncertainty came to an end…at least for now.

On September 5, 2025, the Federal Trade Commission (FTC) officially dismissed its appeals in two major cases: Ryan, LLC v. FTC (5th Circuit) and Properties of the Villages v. FTC (11th Circuit). By dropping those appeals, the FTC essentially confirmed it will no longer push to have its nationwide non-compete ban upheld in court.

Alas, right now non-competes are still legal under federal law.

Read the FTC’s announcement here.

Wait… Weren’t Non-Competes Banned?

Sort of, yes. But the ban never actually went into effect.

Here’s the backstory:

• In August 2024, the FTC issued a sweeping rule that would have banned almost all post-employment non-competes. Here’s the original FTC rule.

• The rule would have also forced employers to rescind existing agreements and notify employees that their non-competes were no longer enforceable.

• The only narrow exceptions were for the sale of a business and senior executives.

But before the ban could take effect in September 2025, the courts stepped in. Both the 5th Circuit (Texas) and 11th Circuit (Florida) heard challenges. Ultimately, a federal court in Texas ruled that the FTC didn’t have the authority to issue such a sweeping regulation. You can read that decision here. The FTC filed appeals to keep the rule alive, but as of this month the FTC has officially withdrawn its appeals, giving up the fight. 

Where Do Non-Competes Stand Now?

The FTC has pivoted from a broad nationwide ban to a case-by-case enforcement approach.

That means instead of banning all non-competes, the FTC will now investigate and pursue situations where non-competes look especially unfair or harmful to competition. This type of legal interpretation isn’t brand new because the FTC has always had some ability to challenge abusive non-competes. But without a full ban in place, there are no sweeping protections for employees across the board who are in an employer-employee relationship (aka they receive a W2 paycheck).

What About State Laws?

Here’s where things get really important: non-compete enforceability now depends heavily on your state. The current administration is essentially saying this is a state issue, not a federal one.

Some states have full bans, while others allow non-competes but with strict limits (like wage thresholds, notice requirements, or time restrictions).

States that completely ban non-competes in nearly any employment contract:

• California
  

• Minnesota
  

• North Dakota

• Oklahoma
  

States that allow non-competes but with strict limits:

• Colorado – only for high-wage earners; strong notice rules
  

• Illinois – salary threshold + 14-day notice
  

• Maine – wage threshold + notice required
  

• Maryland – banned for employees under a wage floor
  

• Massachusetts – max 1 year (exceptions apply); wage + notice rules
  

• Nevada – wage threshold; employer must pay salary during restricted period if terminated without cause
  

• Oregon – max 12–18 months; wage threshold; notice required
  

• Rhode Island – banned for low-wage, interns, and minors; limited otherwise
  

• Virginia – banned for low-wage + interns; allowed otherwise

• Washington – salary threshold; 18-month max; notice required
  

Should You Use a Non-Compete in Your Business?

It depends on:

1. Where you operate (state laws come first).
   

2. What kind of work your employees do (higher-level roles are more likely to meet enforceability standards).

3. How you structure the agreement (non-competes must be reasonable in scope, geography, and duration).
   

In most states, you can’t have a part-time or low-wage employee sign a non-compete. Courts typically limit enforceability to higher earners or specialized employees. And even then, non-competes generally need to be short-term (often capped at 1–3 years) and tied to a specific industry or region.

Note: Independent contractors are NEVER bound by non-competes. Read more HERE!

TLP’s Take 

Non-competes are not dead for employers, but it's not a free-for-all either. Federal law won’t ban them outright (for now), but your state might. If you’re considering implementing a non-compete (or you’re an employee being asked to sign one) make sure you understand your state’s rules and that the terms are reasonable and within the guidelines.

And just to be crystal clear—non-competes are never appropriate for independent contractors. If you see one in a contract, that’s a big legal no-no.