Non-Compete Bans by State: FTC Rule Status 2026

§1The FTC's 2024 non-compete ban no longer exists

In 2024, the FTC issued a rule that would have voided nearly every existing non-compete agreement in the country and banned new ones going forward. It never took effect. A federal court in Texas, Ryan LLC v. FTC, ruled that the agency lacked the statutory authority to issue a rule that broad, and blocked it nationwide before its effective date. The FTC initially appealed that ruling, but on September 5, 2025, the Commission voted 3-1 to drop the appeals in both Ryan LLC v. FTC (5th Circuit) and Properties of the Villages v. FTC (11th Circuit) and to formally accede to the vacatur, meaning the agency agreed the rule was dead rather than continuing to fight for it [Federal Trade Commission, press release, September 5, 2025]. The last procedural step happened on February 12, 2026, when the rule (16 C.F.R. Part 910) was formally removed from the Code of Federal Regulations to bring the federal rulebook in line with the court's decision [Federal Register, Docket 2026-02866, February 12, 2026].

Current FTC Chairman Andrew Ferguson had dissented against the rule when it was first issued in 2024, arguing the agency didn't have the authority to write it, so dropping the appeal wasn't a change of position, it was the current majority declining to keep defending a rule it never supported. That history matters for how durable this is: a future FTC with different commissioners could try a narrower rulemaking, but as of September 2026 there is no federal non-compete rule of any kind on the books, and no rulemaking in progress to bring one back.

§2What replaced the rule: case-by-case enforcement, not a ban

Losing the rule didn't end federal interest in non-competes, it changed the tool. The FTC has shifted to enforcing against individual non-compete agreements it considers an unfair method of competition under Section 5 of the FTC Act, the same authority it always had before the 2024 rule, through its cross-agency Joint Labor Task Force. The clearest example is the FTC's 2026 action against Rollins, Inc., the pest-control company that owns Orkin, HomeTeam, and Critter Control. On April 15, 2026, the FTC filed a complaint and proposed consent order alleging Rollins imposed non-competes on nearly all its employees, typically barring them from working in pest control within a 75-mile radius of any of Rollins' more than 700 U.S. locations for two years after leaving, covering more than 18,000 workers including pest-control technicians and customer-service staff who, per the FTC's complaint, had no ability to negotiate the terms and received no extra pay for signing [Federal Trade Commission, press release, April 15, 2026]. The Commission voted 2-0 to accept the proposed order for public comment, and after a 30-day comment period, voted 2-0 again to approve it as final in June 2026, requiring Rollins to stop enforcing the agreements and notify current and former employees that they are free to compete, including by starting their own business [Federal Trade Commission, press release, June 2026]. The FTC simultaneously sent warning letters to 13 other pest-control companies, telling them to review their own agreements for the same problem.

Rollins wasn't an isolated case. It follows a pet-cremation company ordered to stop enforcing non-competes against roughly 1,800 workers in September 2025, and a building-services contractor, Adamas Amenity Services, stopped from enforcing no-hire agreements in December 2025 [Federal Trade Commission press releases, cited in the FTC's April 2026 Rollins release]. The pattern across all of these: broad, take-it-or-leave-it non-competes applied to hourly or low-wage workers with no bargaining power and no separate consideration for signing, not senior executives with equity and negotiated exits. A payroll or HR platform that still auto-includes a standard non-compete clause in every offer letter regardless of role or pay is now building exactly the fact pattern the FTC has gone after twice in the past year.

§3States where a non-compete is void no matter what the contract says

Independent of anything the FTC does, five states already treat most employee non-competes as unenforceable, and this predates and outlasts the federal rule entirely. California, Minnesota, North Dakota, and Oklahoma void non-competes for nearly all employees as a matter of state statute; Montana does the same but carves out an exception for a non-compete tied to the sale of a business. Washington State passed a new law in March 2026 that will largely ban non-competes for both employees and independent contractors, but it doesn't take effect until June 30, 2027, replacing the salary-threshold regime described below rather than adding to it.

California is worth a separate note because of how far its 2024 changes reached. SB 699, effective January 1, 2024, added Business and Professions Code Section 16600.5, which makes a non-compete void in California even if it was signed in another state under another state's law, closing the workaround where an employer had an out-of-state employee sign under, say, Texas or Florida law before that person later worked for or moved to California. The same law creates a private right of action, letting an employee sue for injunctive relief, damages, and attorney's fees over a void non-compete, and a companion law, AB 1076, requires employers to proactively notify current and former employees in writing that any non-compete clause in their agreement is void. For any company using a single standard offer-letter template across states, that combination, extraterritorial reach plus a private lawsuit right, is the detail most likely to create real exposure.

§4Quick reference: state-by-state non-compete status

This covers the states that come up most often for a company hiring across state lines, not all fifty. If a state isn't listed here, its labor department or attorney general's office publishes current guidance, and it's worth checking directly since several more states have narrower restrictions tied to specific industries, like physicians or broadcasters, that a general table like this one doesn't capture.

§5How the salary-threshold states actually work

In the six salary-threshold states above, whether a non-compete is enforceable at all depends on what the employee earns, not on the reasonableness of the clause itself. Fall below the threshold and the non-compete is void regardless of how narrow or well-drafted it is; clear the threshold and it's still subject to ordinary reasonableness review on scope, duration, and geography. Colorado and Illinois are the two states where this shows up most often in payroll software support questions, since both also draw a second, lower line for customer non-solicitation clauses, which are treated as less restrictive than a full non-compete and allowed at a lower salary. Colorado sets non-solicitation at 60% of its non-compete threshold, $78,008.40 for 2026 against a $130,014 non-compete threshold, and Illinois sets it at $45,000 against a $75,000 non-compete threshold, with both numbers rising again on January 1, 2027, to $80,000 and $47,500. Illinois also layers on a procedural requirement independent of salary: an employer has to give the employee at least 14 calendar days to review the agreement and written advice to consult a lawyer before signing, and skipping that step can make an otherwise-valid agreement unenforceable even for someone above the salary line.

Seven of these thresholds, Colorado, Maine, Oregon, Rhode Island, Virginia, Washington, and Washington D.C., reset every year rather than staying fixed, which is the detail that catches HR teams off guard: a number checked and cleared in 2024 or 2025 can fall below a new 2026 threshold for the same salary, silently voiding an agreement that was enforceable when signed. Washington's number is also on a countdown of its own, its current $126,858 employee threshold (and $317,147 for independent contractors) only applies until the state's broader non-compete ban takes over on June 30, 2027, at which point the threshold approach in Washington disappears entirely rather than adjusting upward again.

§6What this means for offer letters and handbooks in 2026

For a company hiring in one of the five ban states, the fix is simple: drop the non-compete clause for anyone working in that state and don't rely on a choice-of-law clause naming a different state to save it, California's courts and legislature have specifically closed that door and other ban states apply similar reasoning. For the six threshold states, the harder problem is that the answer changes every January, so a template that says a flat "non-compete applies above $X" needs an annual review built into the same calendar cycle as minimum-wage and exempt-salary updates, see our 2026 HR compliance checklist for how those other annual resets are tracked. A multi-state handbook builder that flags state-specific clauses automatically, covered in our comparison of SHRM, BLR, and AirMason, is the more scalable option once a company is hiring in more than two or three states.

The Rollins case adds a separate lesson that applies even in states where a non-compete is fully enforceable on paper: a blanket policy applied to hourly or entry-level staff with no negotiating leverage and no extra pay for signing is now a live federal enforcement target, independent of state law. The safer pattern, and the one that survives both state scrutiny and the FTC's current enforcement priorities, restricts non-competes to roles with real access to trade secrets or client relationships, pairs the restriction with actual separate compensation, and keeps the geographic and time scope narrow enough to describe in one sentence. A worker classified as an independent contractor raises a related but separate question, see our independent contractor vs. employee test guide, since a non-compete imposed on someone who is functionally an employee can compound a misclassification problem with an unenforceable-restriction problem at the same time.

§7Frequently asked questions

Is there any federal statute that currently bans non-competes? No. Once the court fight over the original ban ended, nothing took its place as a nationwide statute, that specific rulebook entry no longer exists at all [16 C.F.R. Part 910, removed via the Federal Register in early 2026]. What the agency has instead is the authority to go after one company's specific agreements at a time when it thinks they cross the line, most visibly Rollins, and that's a narrower tool than a rule binding every employer at once.

If my company is headquartered in a state that allows non-competes, can I still use one for a remote employee in California? No. Under SB 699, what controls is where the person actually does the work, not where the contract was drafted or which state it names as governing, and a California-based hire can take the employer to court over an agreement that ignores that [Cal. Bus. & Prof. Code § 16600.5]. Neither the company's home state nor a provision pointing to some other jurisdiction's rules changes that result.

Does the Rollins case mean the FTC is banning non-competes industry by industry? Not exactly. Notifying an industry's other players that the agency is watching is a step short of writing a rule that binds them, each of those 13 companies would still need its own investigation and its own separate order before anything about its agreements actually changes [per the warning letters described in the FTC's Rollins matter]. A warning letter is a prompt to self-review, not an enforcement order.

My state isn't in the table above, does that mean non-competes are unrestricted there? Not necessarily. Courts in most of those states still weigh whether the restriction is reasonably tailored, and a handful carve out separate rules for specific professions entirely, physicians and broadcasters are common examples, that a short small-business rundown can't account for. Confirming the current statute for that particular state is worth the ten minutes before relying on a template non-compete there.

If an employee's salary was above a state's threshold when they signed but has since fallen behind after the threshold's annual increase, is the non-compete still enforceable? The states with a moving number haven't uniformly settled that question, some evaluate the agreement against the figure in place on the day it was signed, and the annual increase is generally understood to govern new agreements rather than unwind one that was already valid. Because the answer isn't settled the same way in every one of those states, an employer relying on this scenario should confirm the current interpretation for that specific state rather than assume the outcome.