Non-Compete Enforcement Is Getting More Complicated. Why?
The U.S. federal non-compete rule is gone. The FTC formally removed it from the Code of Federal Regulations in February 2026, and the agency has shifted back toward case-by-case enforcement. For employers, this was supposed to bring clarity. It hasn’t.
The picture is more complicated than that. States are moving quickly and in opposite directions, and the FTC has launched an enforcement campaign on top of it. Employers who understand what is actually changing are well-positioned to get ahead of it. Organisations relying on outdated agreements or assuming the rule’s collapse has settled things are taking on more risk than they realise.
The FTC May Be Done With Rulemaking, Not With Enforcement
Using Section 5 of the FTC Act, the agency has taken action against multiple employers in just the past eight months.
In September 2025, it targeted Gateway Services, the largest pet cremation company in the country, for requiring nearly 1,800 employees, from executives to hourly workers, to sign nationwide one-year non-competes. In April 2026, it issued an order requiring Rollins, Inc., the parent of Orkin, HomeTeam, and Critter Control, to stop enforcing non-competes against more than 18,000 workers and simultaneously sent warning letters to 13 other pest-control companies.
The pattern is clear. Recent FTC actions appear focused on broad, one-size-fits-all restrictions imposed on large groups of workers with no meaningful link to trade secrets, intellectual property, or competitive advantage. Employers whose agreements are well-scoped and tied to legitimate business interests do not appear to be the target.
State Rules Are All Over the Map
The most significant state development of 2026 so far is a Washington law signed in March, and it is among the most expansive state laws to date. It does not just address traditional non-competes. It is aimed at reaching forfeiture clauses in equity grants, compensation clawbacks, and training repayment agreements. Employers with employees in Washington have until mid-2027 to assess and restructure those arrangements.
Several states have historically restricted non-competes, and a few have moved further in recent years. California, Minnesota, North Dakota, and Oklahoma remain near-total ban states. Virginia expanded its restrictions, effective July 2025, to cover all non-exempt employees, regardless of pay. Maryland capped non-competes in healthcare. Wyoming banned most non-competes prospectively as of July 2025.
Many states fall somewhere in between. New York still applies a reasonableness standard, but a near-total ban remains pending in the 2025-2026 legislative session. New Jersey lawmakers have been pushing to ban most non-competes, with limited exceptions. Both Illinois and Colorado enforce income thresholds on non-competes, meaning agreements that were valid when signed may no longer be. Texas passed healthcare-specific restrictions effective September 2025.
Florida is the outlier. The CHOICE Act of 2025 allows non-competes of up to four years for employees earning more than twice their county’s mean wage and makes them significantly harder to challenge, though employers who place departing employees on garden leave must continue paying them during that period. For employers with a Florida-based workforce, this represents a meaningful shift toward enforceability, albeit at a cost.
For multistate employers, the critical takeaway is that the company’s headquarters or the state where an agreement was signed may not determine which law applies. Where the employee actually works matters more and more.
Even Alternative Structures Are Getting More Scrutiny
As traditional non-competes have come under pressure, many employers have turned to alternative structures to protect their business interests. Equity clawbacks, deferred compensation forfeitures, broad confidentiality provisions, and training repayment obligations can serve legitimate purposes, and many remain enforceable.
Minnesota expanded its restrictions in 2024 to include service-provider non-solicitation agreements. Washington’s new law goes even further. The FTC’s recent enforcement actions have targeted no-hire agreements between businesses, not just traditional employee non-competes. Employers who have thoughtfully designed their restrictive covenants, with clear business justifications and appropriate scope, are in a strong position. Scrutiny is focused on broad, across-the-board restrictions rather than on well-constructed ones.
Your Restrictive Covenants Deserve a Fresh Look
Employers who are in good shape on this are not the ones with the most aggressive agreements. They are the ones who know what they have, where their people work, and whether their restrictive covenants comply with the law as it stands today. Working with employment counsel to keep agreements current as the law changes is the most effective step an employer can take. The landscape has shifted enough over the past 12 months to make it worthwhile, whether you are starting fresh or just catching up.
