FTC Non-Compete Rule 2026: The Rule Is Dead, Enforcement Is Not

What Is the Status of the FTC Non-Compete Rule in 2026?

The FTC Non-Compete Clause Rule (16 CFR Part 910) was formally removed from the Code of Federal Regulations on February 12, 2026. No federal ban on non-competes exists. Enforceability is now entirely a matter of state law — but the FTC continues challenging individual agreements under Section 5 of the FTC Act, 15 U.S.C. § 45(a), pursuing employers whose non-competes it views as anticompetitive.

Key takeaways

• The FTC's nationwide non-compete ban never took effect and was officially erased from federal regulations on February 12, 2026 (Federal Register doc. 2026-02866).
• The FTC voted 3-1 on September 5, 2025 to dismiss its appeals in Ryan LLC v. FTC and Properties of the Villages v. FTC, ending any prospect of reviving the rule without new rulemaking.
• The FTC is now targeting individual employers under Section 5 — its largest action to date (Rollins, April 2026) freed 18,000 workers from non-competes and imposed a 10-year consent order.
• Four new state laws took effect in 2026, with Washington's near-total ban landing June 30, 2027.
• The single biggest risk factor for FTC scrutiny is applying a non-compete to every employee regardless of role — the "indiscriminate application" pattern that triggered both the Gateway and Rollins enforcement actions.

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How Did the FTC Non-Compete Rule Die? The Complete Timeline

The FTC issued its Non-Compete Clause Rule on April 23, 2024. It was scheduled to take effect September 4, 2024. It never did.

The U.S. District Court for the Northern District of Texas vacated the rule nationwide on August 20, 2024, in Ryan LLC v. FTC, No. 3:24-cv-00986-E (N.D. Tex. 2024). The court found the FTC lacked substantive rulemaking authority over unfair methods of competition and that the rule was arbitrary and capricious under the Administrative Procedure Act (5 U.S.C. § 706). It applied the Major Questions Doctrine — affirmed by the Supreme Court in West Virginia v. EPA (2022) — holding that an agency cannot make decisions of vast economic significance without clear congressional authorization. A Florida district court reached a parallel result in Properties of the Villages v. FTC, No. 5:24-cv-316 (M.D. Fla. Aug. 15, 2024).

The FTC initially appealed both decisions. After the Trump administration took office and Chairman Andrew Ferguson replaced Chair Lina Khan, the Commission voted 3-1 on September 5, 2025 to dismiss both appeals and accede to vacatur. On February 12, 2026, the FTC published a final action in the Federal Register formally removing 16 CFR Part 910 from the Code of Federal Regulations. There is nothing left to revive without restarting the entire rulemaking process under a new statutory theory that courts have already rejected.

Date	Event
April 23, 2024	FTC issues final Non-Compete Clause Rule (89 FR 590)
August 20, 2024	Ryan LLC v. FTC vacates the rule nationwide
September 4, 2024	Would-have-been effective date — rule already vacated
September 5, 2025	FTC votes 3-1 to dismiss appeals and accede to vacatur
November 25, 2025	FTC finalizes consent order with Gateway Services (~1,800 workers)
February 12, 2026	FTC formally removes 16 CFR Part 910 from the Code of Federal Regulations
April 15, 2026	FTC proposes consent order against Rollins, Inc. (18,000+ workers)
June 2026	FTC approves final Rollins consent order (2-0 vote)

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The FTC's New Enforcement Playbook: What the Rollins Case Reveals

The FTC did not walk away from non-competes when it dropped the rule. It changed weapons.

Chairman Ferguson announced the shift explicitly: the agency would pursue "a steady stream" of enforcement actions targeting non-competes that are pernicious and anticompetitive, using the Sherman Act's rule-of-reason analysis and Section 5 of the FTC Act. The enforcement timeline since September 2025 shows escalating scale:

• Gateway Services (pet cremation): ~1,800 workers, consent order finalized November 25, 2025
• Adamas Amenity Services (building services, no-hire agreements): consent order finalized February 12, 2026
• Rollins, Inc. (pest control — Orkin, HomeTeam, Critter Control): 18,000+ workers, consent order finalized June 2026

The Rollins case is the clearest map of what the FTC is looking for. Rollins required non-competes for nearly all of its workforce — including pest-control technicians and customer service representatives earning relatively low wages — without any individualized consideration of the employee's role. The agreements barred workers from the pest-control industry for two years within a 75-mile radius of any of Rollins' 700+ U.S. locations. Rollins then enforced these agreements aggressively: sending hundreds of cease-and-desist letters and filing multiple lawsuits against former employees. Former workers with no resources to fight legal action shut down their own businesses as a result.

The 10-year consent order requires Rollins to stop entering, maintaining, or enforcing any non-compete against covered employees (current and former workers within the last two years, including contractors). Rollins must notify all covered employees in writing that they are no longer bound. It must also report compliance to the FTC for a decade.

The order preserves one carve-out: non-competes remain permissible for Rollins' directors, officers, and senior leaders who hold significant policy-making authority and are eligible for equity grants. Narrowly tailored non-solicitation and confidentiality agreements are also explicitly preserved.

The FTC simultaneously sent warning letters to 13 other pest-control companies, signaling industry-wide scrutiny. Healthcare employers received similar letters in September 2025. No industry has been told it is off the radar.

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What Makes a Non-Compete a Target? A Risk Diagnostic

The FTC has not published a formal safe harbor. But reading across the Gateway, Adamas, and Rollins actions produces a consistent enforcement fingerprint. Use this table to evaluate your own agreements.

Risk Factor	High FTC Risk	Lower Risk
Who must sign	All employees universally, regardless of role	Only employees with trade-secret access or specialized training
Employee wage level	Hourly, non-exempt, or low-wage workers	Senior executives or employees above state compensation thresholds
Duration	Two years or more for non-senior staff	12 months or less, supported by business justification
Geographic scope	Multi-state or nationwide blanket radius	Tied to territory where employee actually worked
Enforcement tactics	Mass cease-and-desist letters; litigation against hourly workers	Selective enforcement; notice before suit
Protectable interest	No individualized analysis of employee's access to sensitive information	Role-specific documentation of trade secrets or customer relationships
Available substitutes	Non-solicitation or NDA would have been adequate	Non-solicitation and NDA genuinely insufficient to protect the interest

If your agreements score "High FTC Risk" in three or more rows, you have a target profile matching the companies the FTC has already pursued. Not sure whether a specific clause is enforceable? Run it through the free non-compete checker. A well-drafted services agreement or contractor agreement can still include post-employment restrictions — but they must be role-specific and proportionate.

For a deeper look at which states' laws apply to your workforce, see our state-by-state non-compete guide. For drafting guidance, see how to write a non-compete that holds up.

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2026 State Law Changes You Cannot Ignore

With the federal rule gone, states have accelerated. At least 101 non-compete bills were active in 34 states as of early 2026. These are the laws that have already taken effect or are locked in:

State	Law	Key Rule	Effective Date
Montana	Expanded physician ban	All licensed physicians; non-competes void	January 1, 2026
Utah	H.B. 270 (Healthcare Worker Post-Employment Amendments)	Near-total ban on non-competes for doctors, nurses, dentists, therapists, and others; exceptions for sale-of-business and negotiated severance	May 6, 2026
Tennessee	H.B. 1034	Non-competes void for workers earning under $70,000 annually; two years or less presumed reasonable for those above threshold	July 1, 2026
Virginia	S.B. 170 (Va. Code § 40.1-28.7:8)	Non-compete void against any employee fired without cause unless employer paid a disclosed severance benefit; civil enforcement right extended to all employees	July 1, 2026
Washington	ESHB 1155	Near-total ban; voids existing non-competes statewide	June 30, 2027
California	SB 699 (pre-existing)	Voids non-competes for California workers regardless of where signed or which state's law the contract nominates	In effect
Colorado	Compensation threshold update	~$127,091 annual income required; 14-day advance written notice required	In effect 2026
Washington (current)	RCW § 49.62	Non-competes only for employees earning $126,858+ (2026 figure); max 18 months; until June 30, 2027	In effect

The choice-of-law trap. A common error in multi-state workforces is pinning all employment contracts to the employer's HQ state — for example, Delaware or Texas — to avoid stricter rules in states where employees actually work. California, Minnesota, Tennessee, Virginia, and Washington all apply their ban to employees working in those states regardless of which state's law the contract nominates. If 14% of your workforce is in Virginia and your template uses Delaware law, those Virginia covenants signed after July 1, 2026 are void unless your firing-without-cause terminations are paired with disclosed severance.

To understand how non-solicitation clauses can protect you where non-competes cannot, or how to structure a compliant employment agreement, those resources go deeper on drafting specifics.

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How to Audit Your Non-Compete Agreements Right Now

Step 1: Map your workforce by work state — not HQ state. Pull every active non-compete and re-sort by the state where the employee physically works. The 2026 state laws attach to work location, not contract choice-of-law.

Step 2: Flag the four 2026 trigger states. Identify every employee in Tennessee, Utah, Virginia, and Washington and apply the new rules: Utah healthcare workers are simply excluded; Tennessee workers under $70,000 are excluded; Virginia workers terminated without cause need a disclosed severance commitment; Washington workers need a plan for the June 30, 2027 wind-down.

Step 3: Segment by role and access to protectable information. The FTC's enforcement pattern is clear — non-competes applied uniformly to all employees regardless of role are the target. For each agreement, document what specific trade secret, customer relationship, or specialized training justifies the restriction. If you cannot articulate it, the agreement is a candidate for elimination.

Step 4: Check duration and geography against state requirements. One year is the new normal across most enforcement-active jurisdictions. Two years requires justification outside Tennessee's safe harbor. Nationwide or very broad geographic restrictions face heightened scrutiny from both state courts and the FTC.

Step 5: Evaluate whether a non-solicitation agreement or NDA achieves the same goal. Both the Rollins and Gateway FTC orders explicitly preserved narrowly tailored non-solicitation and confidentiality agreements. For most employee roles — sales staff, technicians, customer service — non-solicits protect customer relationships without the legal exposure of a non-compete.

Step 6: Update agreements for new hires and renewals going forward. Agreements renewed or amended after July 1, 2026, in Tennessee and Virginia are immediately subject to the new requirements. Do not auto-renew non-competes without reviewing them against current state law. Pactlio's contractor agreement template and services agreement template can help you generate a starting draft — review it with counsel for your specific jurisdiction.

Step 7: For Washington employees, prepare now. The June 30, 2027 effective date for Washington's near-total ban sounds distant, but employees subject to existing covenants need notice letters, and your replacement protections (non-solicits, NDAs, invention-assignment agreements) need to be drafted before the ban voids your current ones. If any of those Washington employees are part of a separation agreement (see our separation agreement guide), severance terms may need revision too. See also: how to amend a contract if existing agreements need modification.

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Common Mistakes to Avoid

• Using a single national non-compete template for all employees. The "indiscriminate application" pattern is the FTC's primary enforcement trigger, and state law divergence in 2026 makes a single template legally wrong in multiple states simultaneously.
• Relying on a HQ-state choice-of-law clause to avoid state bans. California, Minnesota, Tennessee, Virginia, and Washington override contractual choice-of-law for employees who work in those states.
• Applying non-competes to hourly, non-exempt, or low-wage workers. Every FTC enforcement action since 2025 has focused on agreements applied to workers with no realistic access to trade secrets. This profile will continue to draw scrutiny.
• Aggressively enforcing agreements with mass cease-and-desist letters. Rollins' enforcement tactics — hundreds of C&D letters against former hourly workers — were cited explicitly in the FTC's complaint. Aggressive enforcement is itself an aggravating factor, not a neutral business decision.
• Not pairing Virginia non-competes with severance disclosure language. Under S.B. 170, effective July 1, 2026, a non-compete signed without a disclosed severance commitment is automatically void if the employee is later fired without cause, even if the agreement was otherwise reasonable.
• Forgetting that Washington's 2027 ban also voids existing agreements. ESHB 1155 does not grandfather covenants signed before the effective date. Existing Washington non-competes become void on June 30, 2027, including ones already in force.

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Sources

• FTC Non-Compete Clause Rule — Federal Register removal, doc. 2026-02866: https://www.federalregister.gov/documents/2026/02/12/2026-02866/revision-of-the-negative-option-rule-withdrawal-of-the-cars-rule-removal-of-the-non-compete-rule-to
• FTC Noncompete Rule page (16 CFR Part 910 archive): https://www.ftc.gov/legal-library/browse/rules/noncompete-rule
• FTC press release — accede to vacatur, September 5, 2025: https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-files-accede-vacatur-non-compete-clause-rule
• FTC press release — Rollins enforcement action, April 15, 2026: https://www.ftc.gov/news-events/news/press-releases/2026/04/ftc-takes-action-against-noncompete-agreements-securing-protections-workers
• FTC final consent order — Rollins, June 2026: https://www.ftc.gov/news-events/news/press-releases/2026/06/ftc-approves-final-consent-order-pest-control-noncompete-matter
• Federal Register — Rollins proposed consent order analysis, April 22, 2026: https://www.federalregister.gov/documents/2026/04/22/2026-07844/rollins-inc-analysis-of-proposed-agreement-containing-consent-order-to-aid-public-comment
• FTC noncompete enforcement hub: https://www.ftc.gov/nonmerger/noncompete
• Ryan LLC v. FTC, No. 3:24-cv-00986-E (N.D. Tex. Aug. 20, 2024): https://www.ftc.gov/legal-library/browse/cases-proceedings/2024/08/ryan-llc-v-ftc
• Virginia S.B. 170 — Va. Code § 40.1-28.7:8 amendment (signed April 13, 2026): https://www.akingump.com/en/insights/alerts/states-continue-to-restrict-non-compete-agreements-tennessee-and-virginia-enact-new-laws
• Tennessee H.B. 1034 — $70,000 compensation threshold (signed May 7, 2026): https://www.bassberryhrlawtalk.com/tennessee-non-compete-agreement/
• Utah H.B. 270 — Healthcare Worker Post-Employment Amendments (signed March 24, 2026): https://faircompetitionlaw.com/2026/03/30/101-noncompete-bills-in-34-states-with-six-new-laws-march-2026/
• Washington ESHB 1155 — near-total ban (eff. June 30, 2027): https://loio.com/guides/non-compete-tracker-state-by-state/
• Katz Banks Kumin — March 2026 nationwide status update: https://katzbanks.com/employment-law-blog/noncompete-agreements-whats-the-status-of-laws-restricting-them-nationwide-march-2026-update/

This article is general information, not legal advice. Laws vary by jurisdiction. Pactlio generates professional drafts for review — have a licensed attorney review anything important.