Noncompetes After the FTC’s Retreat: What Employers and Founders Do Now?

The federal effort to ban noncompete agreements is over, at least by rule. On February 12, 2026, the FTC formally removed its Non-Compete Clause Rule from the Code of Federal Regulations, and 16 C.F.R. Part 910 no longer exists. The 2024 rule that would have voided tens of millions of agreements never took effect: a Texas court set it aside, the agency withdrew its appeals, and it has now cleared the books entirely.

That does not make noncompetes safe to use freely. Two things replaced the rule, and both demand attention.

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First, case-by-case federal enforcement continues. The FTC has said it will still challenge noncompetes it views as anticompetitive, and it has acted, ordering a large employer in 2026 to stop enforcing noncompetes against thousands of workers. The absence of a rule is not the absence of risk, especially for broad restrictions imposed on rank-and-file employees.

Second, and more important for daily practice, the states are moving fast and in different directions. The landscape is now a genuine 50-state patchwork. Several states have added or raised income thresholds below which noncompetes are void. Others have imposed new procedural conditions or tied enforceability to severance. At least one state has enacted a near-total ban that will void even higher-earner agreements when it takes effect. A noncompete enforceable in one state may be void, or expose the employer to penalties, in the next.

For multi-state employers, that is the central problem: one template does not work. A restriction drafted for your home state can be unenforceable, or affirmatively unlawful, for an employee two states away. Enforceability now turns on the employee’s location, income, role, and the timing of the agreement.

The practical response is to stop relying on the noncompete as your primary protection and build layered, more durable safeguards.

Confidentiality and trade-secret agreements protect the information you actually need to protect and are enforceable almost everywhere.

Non-solicitation clauses, properly scoped, can protect customer and employee relationships with far less legal fragility than a naked noncompete.

Invention-assignment terms secure what your team builds, which is often the real asset.

And sale-of-business covenants remain broadly enforceable when tied to a genuine ownership stake, which matters in any acquisition or founder exit.

For founders specifically, the lesson is that a noncompete may not survive first contact with a court, so protection should not depend on it. Build the confidentiality, non-solicit, and invention-assignment layers into your onboarding paperwork from the start.

The headline is that the federal ban is dead. The reality is that noncompete risk went up, not down, because it is now dispersed across dozens of tightening state regimes. Audit your existing agreements against each state where you have employees, and fix them before you need to enforce one.

Legal note: This article provides general information and is not legal advice.

Authorities: FTC Non-Compete Clause Rule, 16 C.F.R. pt. 910 (removed from the C.F.R. Feb. 12, 2026); Ryan, LLC v. FTC, No. 3:24-cv-00986 (N.D. Tex. Aug. 20, 2024); Loper Bright Enters. v. Raimondo, 603 U.S. 369 (2024); see also recent Washington, Tennessee, and Virginia noncompete statutes (2026-2027 effective dates).