Non-Compete Law Updates 2026: New State Laws and the FTC's Exit

The short version as of 6 October 2026: the FTC's nationwide non-compete rule is gone. It was removed from the Code of Federal Regulations effective February 12, 2026, and the action has moved to the states. Three state laws take effect between May and July 2026 (Utah, Tennessee, Virginia), Washington's near-total ban takes effect on June 30, 2027, and the FTC now acts case by case through consent orders.

Reviewed and corrected on 6 October 2026. This is general information, not legal advice; check the cited statute or opinion before relying on it.

How to read this page

This page began as a September 2025 update and has been revised since. A dated update goes stale in two ways: items that were pending when it was written get resolved, and early details turn out to be wrong. Where that happened, this version says what was true then and what is true now, rather than quietly rewriting the past. The table below does that for the items most likely to have changed.

Official text, as of 6 October 2026

Citation: Federal Trade Commission, Revision of the Negative Option Rule, Withdrawal of the CARS Rule, Removal of the Non-Compete Rule To Conform These Rules to Federal Court Decisions, 91 Fed. Reg. 6507 (Feb. 12, 2026), official text on federalregister.gov.

"Third, the Commission is removing its 'Non-Compete Clause Rule' ('Non-Compete Rule') from the Code of Federal Regulations."

What changed in 2026: 16 CFR Part 910 no longer exists, three state laws took effect, and Washington enacted a ban that voids existing covenants in 2027.

2026 non-compete changes at a glance

Florida moves the other way. Most of the states above are tightening; Florida, and Kansas on non-solicits, give employers more room.

What changed this year

The federal rule has been dead since a court set it aside in August 2024, and as of February 12, 2026 it is also off the books. What replaced it is a mix of consent orders from the FTC and the busiest stretch of state legislation on the subject in years. For a multi-state employer, the work is to sort covenants by the employee's work state and check each against the statutes below.

TL;DR

• The FTC removed its non-compete rule (16 CFR Part 910) from the CFR effective February 12, 2026, after the Commission voted 3-1 on September 5, 2025 to dismiss its appeals in Ryan, LLC v. FTC and Properties of the Villages v. FTC. Federal action is now case by case. The Rollins consent order (proposed April 15, 2026, finalised June 22, 2026, more than 18,000 employees) follows the earlier Gateway Services order (September 4, 2025, nearly 1,800 employees).
• Three state laws take effect between May and July 2026: Utah's healthcare-worker ban (May 6), Tennessee's $70,000 floor (July 1) and Virginia's severance rule plus healthcare-professional ban (July 1). Washington's near-total ban takes effect June 30, 2027.
• Healthcare is the pressure point. Utah, Virginia, Montana (Mont. Code Ann. § 28-2-724) and Wyoming (physicians) restrict healthcare non-competes, and the FTC sent warning letters to healthcare employers and staffing firms on September 10, 2025.
• Maryland H.B. 1016 became law (Chapter 301, effective October 1, 2026) for licensed architects. New York S9759 passed the Senate on June 3, 2026 and is not law. New Jersey S1407 is a pending bill.
• The 2026 covenant is jurisdiction-tagged, tied to the employee's compensation, and in some states conditioned on severance.

Part of our state law reference series.

The federal status, briefly

Three things happened federally, and they keep getting conflated.

The rule was set aside. The FTC's Non-Compete Clause Rule was published May 7, 2024 (89 FR 38342; 16 CFR Part 910). It would have barred most new non-competes with workers and made existing ones unenforceable for most workers other than senior executives. Three federal district courts ruled on challenges, according to the Federal Register notice that removed it. One denied a preliminary injunction (ATS Tree Services v. FTC, E.D. Pa., July 23, 2024). One entered a preliminary injunction limited to the plaintiff (Properties of the Villages v. FTC, M.D. Fla., August 15, 2024). One set the rule aside: Ryan, LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), which concluded that the FTC acted "in excess of its statutory authority" and that the rule was "arbitrary and capricious," and so had to be set aside under the Administrative Procedure Act.

Earlier versions of this page said the Eleventh Circuit reached a parallel result in Properties of the Villages. That was wrong. It was a Middle District of Florida preliminary injunction limited to one plaintiff, and the FTC's appeal to the Eleventh Circuit was dismissed.

The appeals were dropped. On September 5, 2025, the Commission voted 3-1 to dismiss its appeals in Ryan (5th Cir.) and Properties of the Villages (11th Cir.) and accede to the vacatur. Only one of the three district courts set the rule aside, so we do not say the courts as a group rejected it. A future categorical ban would need new rulemaking.

The rule was removed from the books. On February 12, 2026, the FTC published a final action removing the Non-Compete Rule from the CFR, effective that day (91 FR 6507). 16 CFR Part 910 no longer exists.

Enforcement continues, case by case. On September 4, 2025, the FTC opened a public inquiry on employer non-competes (comments due November 3, 2025). The inquiry is general, not limited to healthcare. The same day it announced a proposed consent order against Gateway Services, the largest pet cremation business in the country, covering nearly 1,800 workers whose agreements barred work in the industry anywhere in the U.S. for one year. The Commission finalised that order in November 2025. On September 10, 2025, the Chairman sent warning letters to healthcare employers and staffing firms.

On April 15, 2026, the FTC announced a proposed consent order against Rollins, Inc. (the parent of Orkin and HomeTeam). The FTC alleged the company imposed non-competes on nearly all its employees that typically barred pest-control work for two years, usually within 75 miles of one of its 700-plus locations. The order covers more than 18,000 employees, and the FTC sent warning letters to 13 other pest-control companies. The Commission approved the final order 2-0 on June 22, 2026.

The practical read for in-house counsel: federal exposure in 2026 is consent-order risk on a covenant that looks like Rollins or Gateway (low-wage workforce, signed with no negotiation or extra consideration, broad geography), not a categorical ban.

The state laws to act on now

Tennessee: $70,000 compensation floor

Statute: Tenn. Code Ann. §§ 50-1-210 and 50-1-211, added by 2026 Tenn. Pub. Acts ch. 934 (H.B. 1034), signed May 7, 2026. Effective: July 1, 2026.

Section 50-1-211 provides that an employer "shall not require, request, or enforce a noncompete agreement against an employee whose annualized compensation is less than seventy thousand dollars ($70,000)." A covenant signed in violation is void and unenforceable. Annualized compensation is total compensation from the employer, including wages, salary, commissions, nondiscretionary bonuses and other forms of remuneration, and for hourly employees it is the hourly rate times 40 times 52.

Section 50-1-210 sets presumptions on time. A court presumes reasonable a restraint of two years or less against a former employee or independent contractor, three years or less against distributors, dealers, franchisees and similar parties, and the longer of five years or the payment period against an owner or seller of a business. A longer restraint is presumed unreasonable. The presumptions go to duration only, and the section preserves confidentiality, customer non-solicitation and employee non-solicitation agreements. A court may modify a covenant to make it reasonable.

The act applies to "proceedings occurring and agreements entering into, renewed, or amended" on or after July 1, 2026. That wording reaches proceedings after that date, so do not assume an older covenant sits outside it. The drafting move is a representation in the covenant that the employee meets the threshold on the signing date.

Utah: healthcare-worker non-competes

Statute: Utah Code Ann. Title 34, Chapter 51, as amended and enacted by H.B. 270 (2026). Effective: May 6, 2026.

Utah's general statute has capped post-employment non-competes at one year for agreements entered into on or after May 10, 2016 (§ 34-51-201). H.B. 270 adds a "healthcare non-compete agreement": an agreement in which a healthcare worker promises not to provide, after leaving, a service the worker may provide under the scope of the worker's license. From May 6, 2026 a person and a healthcare worker may not enter into one, and an agreement that violates the rule is void (§ 34-51-201). It does not reach agreements signed before that date. "Healthcare worker" covers a long list of licensees, including physicians, physician assistants, registered and licensed practical nurses, advanced practice registered nurses, dentists and psychologists.

Two exceptions remain: a reasonable severance agreement mutually and freely agreed in good faith, and covenants arising out of the sale of a business. New § 34-51-203 also voids a nonsolicitation agreement signed on or after May 6, 2026 that prevents a healthcare worker from telling a patient about the worker's current or future place of employment.

Virginia: severance rule and healthcare ban

Statute: Va. Code Ann. § 40.1-28.7:8, as amended by 2026 Acts chs. 883 (S.B. 170, approved April 13, 2026), 1113 and 1114. Effective: July 1, 2026.

Virginia already barred covenants not to compete with "low-wage" employees. In 2026 the Department of Labor and Industry gives the threshold as average weekly earnings below $1,507.01, which works out to $78,364.52 a year. The statute also treats as low-wage any employee entitled to overtime under the federal Fair Labor Standards Act. It excludes people paid mainly by sales commissions, incentives or bonuses. (Earlier versions of this page gave a figure of roughly $76,000, which was out of date.)

Two things are new on July 1, 2026:

1. Severance. Under subsection C, no covenant is enforceable if the employer discharges the employee without providing severance benefits or another monetary payment, unless the discharge is for cause. The payment must be disclosed when the covenant is signed. The statute does not define "cause" in subsection A and sets no minimum amount. The chapter 883 act says nothing in it affects any contract, covenant or agreement entered into, amended or renewed before July 1, 2026.
2. Healthcare professionals. Subsection B now bars an employer from entering into, enforcing or threatening to enforce a covenant not to compete with a "health care professional," defined as anyone licensed, registered or certified by the Boards of Medicine, Nursing, Counseling, Optometry, Psychology or Social Work. Subsection H preserves covenants in a qualifying sale of a health care business, and subsection I preserves certain repayment and customer non-solicit provisions.

Enforcement has two tracks. The Commissioner can assess a civil penalty of $10,000 for each violation of subsection B or C (subsection E), and the employee can sue to void the covenant and recover liquidated damages, lost compensation, damages and attorney fees (subsections D and F).

Washington: near-total ban on June 30, 2027

Statute: Wash. Rev. Code ch. 49.62, as amended by Engrossed Substitute House Bill 1155 (Laws of 2026, ch. 149), approved by Gov. Bob Ferguson on March 23, 2026. Effective: June 30, 2027.

Today Washington's law rests on an income threshold (originally $100,000, adjusted annually), disclosure of the covenant by the time the employee accepts the offer, independent consideration for covenants signed after employment starts, layoff pay and an 18-month presumption. ESHB 1155 replaces that regime. Section 4 provides that, beginning on the effective date, all noncompetition covenants "are void and unenforceable ... regardless of when the parties entered into the noncompetition covenant." It is a violation for an employer to enforce, threaten to enforce, represent that a worker is subject to, or enter into a noncompetition covenant. The remedy is the greater of actual damages or a $5,000 statutory penalty, plus fees.

By October 1, 2027, an employer must make reasonable efforts to give written notice to current and former employees and independent contractors whose covenants are still within their effective period that the covenants are void and unenforceable.

The definition of "noncompetition covenant" does not include nonsolicitation agreements (as defined, with an 18-month limit), confidentiality agreements, trade-secret or invention covenants, covenants tied to selling or buying an ownership interest of one percent or more, covenants by franchisees in compliant franchise sales, and certain education-expense repayment agreements that expire within 18 months. Whether the retroactive voiding will face a constitutional challenge, and how a court would rule, is not something we researched.

ESHB 1155 leaves RCW 49.62.050 untouched. For Washington-based workers, that section already voids covenant terms that require adjudication outside Washington, strip the chapter's protections, or apply another state's law. There is more in our Washington non-compete law guide.

Also on the books: Maryland, Wyoming, Montana

Maryland. H.B. 1016 was approved by the Governor on April 28, 2026 as Chapter 301, effective October 1, 2026. Earlier versions of this page described it as a pending bill that would void non-competes whenever any employer relocated. The enacted version is narrower. According to its official synopsis, it applies the state's existing noncompete ban (Md. Code, Lab. & Empl. § 3-716) to licensed architects employed by certain employers that relocate the majority of their employees outside the state or have their principal place of business outside it. Section 3-716 as amended also covers employees earning no more than 150% of the state minimum wage and licensed direct-care healthcare employees earning no more than $350,000 in total annual compensation.

Wyoming. W.S. 1-23-108 voids covenants not to compete that restrict the right to receive compensation for labor, with exceptions for the sale of a business, trade secrets, a sliding scale of relocation and training expense recovery, and executive and management personnel and their professional staff. Subsection (b) voids physician covenants. It applies to contracts entered into on or after July 1, 2025.

Montana. Mont. Code Ann. § 28-2-724 bars contracts that restrict physicians, psychologists, naturopathic physicians, social workers, counselors, addiction counselors, marriage and family therapists, behavioral health peer support specialists, nurses and physician assistants from practicing after the relationship ends, with exceptions for the sale of a practice and for certain repayment provisions. Earlier versions of this page cited the wrong section number (28-2-712). We did not verify the effective date of each 2025 amendment, so check the session laws if the date matters to your matter.

Florida and Kansas: the other direction

Florida's CHOICE Act (Fla. Stat. §§ 542.41 to 542.45, effective July 1, 2025 under the act's text) lets a "covered employer" use a "covered noncompete agreement" lasting up to four years, and a garden-leave notice period of up to four years, with a "covered employee." A covered employee is one who earns or is reasonably expected to earn more than twice the annual mean wage of the relevant county, and the term excludes health care practitioners. The Act applies to a covered employee whose primary place of work is in Florida "regardless of any applicable choice of law provisions," and it requires written advice of the right to seek counsel and notice at least seven days before an offer expires (§ 542.45). The Florida Statutes annotation adds that the act became law without the Governor's signature on July 3, 2025 and gives August 15, 2025 as the constitutional effective date, so check which date matters for a covenant signed in between. Details are in our Florida non-compete guide.

Kansas S.B. 241 (2025 Kan. Sess. Laws ch. 74, approved April 8, 2025) rewrote K.S.A. 50-163. In stated circumstances it makes certain written non-solicitation covenants "conclusively presumed to be enforceable," for example an owner's covenant not to solicit employees or owners for up to four years. It does not touch traditional non-competes.

A hypothetical to test your template

Take a hypothetical Series C software company. It fires a director-level engineer earning $185,000 without cause. The engineer was hired in Tennessee and later moved to Washington without anyone updating the HR record. The covenant is 18 months long and says nothing about severance.

The first question is which state's rules apply, and several of the statutes below point to the employee's work state. Washington already voids out-of-state choice-of-law and venue terms for Washington-based workers (RCW 49.62.050), and from June 30, 2027 it voids the covenant itself. California's Bus. & Prof. Code § 16600.5 says an employer "shall not attempt to enforce a contract that is void under this chapter regardless of whether the contract was signed and the employment was maintained outside of California." Whether a Tennessee covenant signed before July 1, 2026 is affected by the new act turns on the applicability language quoted above, and we did not research any court decisions on it.

In practice a company in that position would treat the engineer as a Washington employee, drop the non-compete, rely on a non-solicit, confidentiality and invention-assignment terms, and decide whether to offer a payment for a clean separation. Those are drafting choices, not rules of law.

What is still pending

New York. S4641A passed the Senate on June 9, 2025, and S9759 (Sen. Gianaris, introduced April 6, 2026) passed the Senate on June 3, 2026. Both were delivered to the Assembly and referred to its Labor Committee; the Assembly same-as bill for S9759 is A10023, and the nysenate.gov page for S9759 shows its status as "In Assembly Committee." S9759 would add Labor Law § 191-d. It would bar employers from seeking, requiring, demanding or accepting a non-compete from a "covered individual" or a "health related professional," and void any such agreement sought or accepted after the effective date. "Covered individual" excludes a "highly compensated individual," defined as average annualized cash compensation of $500,000 or more (indexed to inflation from 2027). It preserves confidentiality, trade-secret and client non-solicitation agreements. The bill applies to agreements sought after its effective date. Neither bill is law. There is more in our New York non-compete law guide.

New Jersey. S1407 (Sens. Lagana and Cryan) and its Assembly counterpart A1829 were pre-filed for the 2026 session. As introduced, S1407 would bar an employer from seeking, requiring, demanding or accepting a non-compete clause from any worker after the effective date, including a "senior executive" (a worker in a policy-making position paid at least $151,164). For clauses already in effect, the bill splits the two groups. Employers would have to notify other workers within 30 business days after the effective date that their non-competes cannot be enforced. A senior executive's existing clause would be void unless it meets the bill's requirements, which include a written disclosure within 30 business days and a restricted period of no more than 12 months. LegiScan's tracker shows the last action on S1407 as its introduction and referral to the Senate Labor Committee on January 13, 2026. We could not load the legislature's own status page, so confirm the current status there before relying on it.

Federal. The Rollins and Gateway orders are the public templates for FTC enforcement. We do not predict where the next one lands, but the September 2025 healthcare warning letters show where the agency has said it is looking.

Drafting checklist for the multi-state employer

Run any new non-compete through this before signing it out.

1. Controlling jurisdiction. Default to the employee's principal work location, not headquarters. California's § 16600.5 reaches covenants signed elsewhere, Washington voids out-of-state choice-of-law terms for Washington-based workers, and Florida's CHOICE Act applies to covered employees who work primarily in Florida regardless of a choice-of-law clause. For the state-by-state picture, start with our non-compete enforceability by state guide.
2. Compensation thresholds. Tennessee: $70,000 annualized. Illinois: $75,000 for non-competes under 820 ILCS 90/10 (see our Illinois guide). Virginia: low-wage employees, meaning average weekly earnings under $1,507.01 in 2026 or entitlement to FLSA overtime. Maryland: 150% of the state minimum wage under § 3-716. Other states have their own figures; read each statute rather than relying on a count of states.
3. Industry prohibitions. Healthcare: Utah, Virginia, Montana, Wyoming (physicians) and Maryland (§ 3-716), among others. Broadcasters: Utah has a separate rule in § 34-51-201. Lawyers: professional conduct Rule 5.6 limits covenants between lawyers.
4. Duration. Utah caps general post-employment non-competes at one year. Tennessee presumes two years or less reasonable in time. Beyond those statutory points, how long a defensible covenant should run is a judgment call for the lawyer, and we do not state a rule for it.
5. Severance pairing. Virginia conditions enforcement on severance after a discharge without cause. Massachusetts requires a garden leave clause or other mutually agreed consideration specified in the agreement (Mass. Gen. Laws ch. 149, § 24L(b)(vii)).
6. Notice before signing. Periods differ: Illinois 14 calendar days (820 ILCS 90/20), Massachusetts the earlier of a formal offer or 10 business days before employment starts (§ 24L(b)(i)), Maine at least 3 business days before the employer requires signature (26 M.R.S. § 599-A(4)), Florida (covered agreements) 7 days before an offer expires, Washington disclosure by the time the offer is accepted under current law. Check each state before reusing a template.
7. Washington wind-down. Inventory affected employees, draft the October 1, 2027 notice, and pick the substitute protections.
8. Protectable interest. Document why the covenant is needed. A covenant with no documented interest, no negotiation and no extra consideration looks like the ones the FTC alleged in Rollins and Gateway.

FAQ

Is the FTC non-compete ban still in effect in 2026? No. A federal court set the rule aside in August 2024, the FTC voted 3-1 on September 5, 2025 to dismiss its appeals, and it removed the rule (16 CFR Part 910) from the Code of Federal Regulations effective February 12, 2026. There is no federal ban. The FTC acts case by case, as in the Gateway Services and Rollins consent orders.

What new non-compete laws take effect in 2026? Utah's healthcare-worker ban took effect May 6, 2026. On July 1, 2026, Tennessee's $70,000 floor and Virginia's severance rule and healthcare-professional ban took effect. Maryland's H.B. 1016, narrowed to licensed architects, takes effect October 1, 2026. Washington's near-total ban is signed but does not take effect until June 30, 2027.

What is the Tennessee non-compete threshold for 2026? $70,000 in annualized compensation. Under Tenn. Code Ann. § 50-1-211, an employer cannot require, request or enforce a non-compete against an employee whose annualized compensation is below that figure. A separate section, § 50-1-210, presumes a restraint of two years or less reasonable in time for an employee or independent contractor. The act was signed May 7, 2026 and took effect July 1, 2026.

Does Virginia require severance to enforce a non-compete? After a discharge without cause, yes. Under Va. Code § 40.1-28.7:8(C), a covenant is not enforceable if the employer discharges the employee without providing severance benefits or another monetary payment, unless the discharge is for cause, and the payment must be disclosed when the covenant is signed. The Commissioner can assess a $10,000 civil penalty per violation, and employees can sue for damages and fees. The act applies to covenants entered into, amended or renewed on or after July 1, 2026.

Are existing non-competes void in Washington? They will be. ESHB 1155, approved March 23, 2026, makes noncompetition covenants void effective June 30, 2027, regardless of when they were signed. Employers must make reasonable efforts to give written notice to affected current and former workers by October 1, 2027.

Which states ban non-competes outright? California, North Dakota, Oklahoma and Minnesota are generally described as banning most employee non-competes, and we did not re-verify those statutes for this update. Wyoming voids most employee non-competes for contracts entered into on or after July 1, 2025, with exceptions, and Washington joins in 2027. Many other states restrict non-competes by pay level, profession or process rather than banning them.

Did any state make non-competes easier to enforce? Florida did. Its CHOICE Act allows covered noncompete and garden-leave agreements of up to four years for covered employees. Kansas S.B. 241 made certain non-solicitation covenants conclusively presumed enforceable, but it left traditional non-competes alone.

How long can a non-compete last in 2026? It depends on the state. Utah caps general post-employment non-competes at one year. Tennessee presumes two years or less reasonable in time for employees and independent contractors, and a longer restraint is presumed unreasonable. Florida's CHOICE Act allows up to four years for covered employees.

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Arshita Anand

Co-Founder & CEO · Attorney

Arshita leads product and strategy at Vaquill AI, the US primary law data API. As an attorney, she decides which law we carry, how each section is sourced and cited, and what legal AI and compliance teams need from the data.