The Federal Trade Commission (FTC) issued a final rule in April 2024 banning most non-compete agreements in employment contracts, with an effective date of September 4, 2024. However, in the case of Ryan LLC v. FTC (N.D. Tex., Case No. 3:24-cv-00986), U.S. District Judge Ada Brown issued a preliminary injunction in July 2024 blocking the rule’s enforcement, and on August 20, 2024, she issued a final order setting aside the rule nationwide, declaring it unlawful under the Administrative Procedure Act.
The FTC appealed this decision to the U.S. Court of Appeals for the Fifth Circuit (Case No. 24-10951) on October 18, 2024. Briefing proceeded into early 2025, with the FTC filing its opening brief on January 2, 2025, and appellees (including Ryan LLC and the U.S. Chamber of Commerce) responding on February 3, 2025. The FTC then requested and received stays of the proceedings in March and July 2025, extending until September 8, 2025.
On September 5, 2025, following a change in presidential administration, the FTC filed an unopposed motion to voluntarily dismiss the appeal under Federal Rule of Appellate Procedure 42. The Fifth Circuit granted the motion and dismissed the appeal on September 8, 2025, terminating the case. The FTC also dismissed a related appeal in the Eleventh Circuit (Properties of the Villages v. FTC) around the same time, effectively acceding to the vacatur of the non-compete rule.
As of January 2026, the district court’s order remains in effect, and the FTC’s non-compete rule is not enforceable nationwide. The FTC has shifted focus to case-by-case enforcement against unfair non-competes under existing antitrust laws, rather than pursuing a blanket ban. There are no active appeals in this matter, though state laws on non-competes vary and may still restrict their use in certain jurisdictions.
California has one of the strictest policies in the U.S. against non-compete clauses in employment contracts, prioritizing employee mobility and open competition. Under Business and Professions Code Section 16600, any contract that restrains someone from engaging in a lawful profession, trade, or business is generally void and unenforceable. This has been the longstanding rule, but recent legislation has further reinforced and expanded these protections.
In January 2024, two new laws took effect to strengthen the ban:
– – Senate Bill 699 (now codified as Business and Professions Code Section 16600.5): Declares non-compete agreements unlawful (not just void) and prohibits employers from entering into or enforcing them, even if the agreement was signed outside California or for employment outside the state. It also creates a private right of action for employees to sue for damages, injunctive relief, and attorneys’ fees.
– – Assembly Bill 1076 (now codified as Business and Professions Code Section 16600.1): Explicitly prohibits non-compete clauses and required employers to notify current and certain former employees (employed after January 1, 2022) by February 14, 2024, that any existing non-compete provisions are void. Failure to provide this notice can result in civil penalties of up to $2,500 per violation.
While non-competes are largely prohibited in the employment context, there are narrow exceptions under California law:
– – Sale of a business: Non-competes may be enforceable when tied to the sale of a business, goodwill, or ownership interest (Business and Professions Code Sections 16601 and 16602.5).
– – Dissolution of partnerships or LLCs: Limited restrictions may apply upon dissolution or dissociation (Section 16602).These exceptions are interpreted narrowly by courts, and the agreements must be reasonable in scope, duration, and geography to be upheld.
The federal FTC’s attempted nationwide ban on non-competes was struck down in 2024 and abandoned in 2025, but this does not affect California’s independent prohibitions, which remain in full force. Employers are advised to review and revise contracts to ensure compliance, focusing instead on alternatives like non-solicitation clauses (which may be enforceable if narrowly tailored) or enhanced trade secret protections.
For specific situations, consulting a California employment law attorney is strongly recommended, as case law continues to evolve and this is not an authoritative and complete narrative of this law.