Obviously, such noncompete agreements (or “noncompetes”) act to seriously constrain a worker’s ability to pursue another or even better job that is in keeping with their career path, specialty, skill set, etc. It is estimated that some 30 million Americans are subject to such agreements, but recent developments at the federal and state level are having a major impact on the legitimacy and enforceability of these agreements.
Current Federal Position
Readers might recall that, back in April of 2024, the Federal Trade Commission (FTC) issued a final rule banning noncompetes. The U.S. Chamber of Commerce, then, filed a legal challenge, arguing that the FTC did not have the authority to issue rules that define unlawful methods of competition. In its ruling, the U.S. District Court for the Northern District of Texas, prohibited the FTC from enforcing the rule nationwide. See Ryan LLC, 2024 WL 3879954 (N.D. Tex. Aug. 20, 2024). The FTC later appealed to the U.S. Fifth Circuit Court of Appeals in New Orleans. But on September 5, 2025, the FTC formally abandoned its appeal to the Fifth Circuit; and, in so doing, ended its effort to impose a nationwide ban on all noncompetes.
Instead, the new administration now takes the position that noncompete clauses in employment contracts should be reviewed and adjudicated on a case-by-case basis, using current laws. According to the National Law Review (NLR), the agency has only reported two enforcement actions over the last year relating to noncompete agreements: one action ordering the country’s largest pet cremation business to stop enforcing noncompetes and a second merely issuing warning letters to healthcare employers and staffing companies to review their employment agreements to ensure they are appropriately tailored and compliant with the law.
So what is the law? From a federal position, that seems to be up in the air; however, the U.S. Supreme Court recently ruled in the Loper Bright decision that an agency’s interpretation where the law is ambiguous is not entitled to deference.
Current State Laws
The NLR notes that 13 states either enacted or effectuated legislation impacting noncompete enforceability in 2025. Below is a summary of some of those laws based on an April, 2026 NLR publication.
- The simplest type of noncompete restriction is a total ban. Six states so far have instituted total bans (CA, MN, MT, ND, OK, WY), and several legislatures are considering them.
- One of the most common types of laws restricting noncompetes is one that imposes wage thresholds below which employees are protected from noncompetes. Twelve states (CO, D.C., IL, ME, MD, MA, NV, NH, OR, RI, VA, WA) have some sort of wage threshold noncompete ban.
- The most common type of state law restricting noncompetes is a ban or restriction of noncompetes for certain, or all, healthcare professionals. These are increasingly popular, as demonstrated by the dozens of proposed bills introduced in the past two years alone that would either introduce healthcare industry bans in states with no or few other statutory restrictions on noncompetes, or would expand the types of defined healthcare professionals benefiting from a noncompete ban. Sixteen states currently have some type of noncompete ban or restriction benefitting healthcare professionals (AR, CT, DE, IN, IA, KY, LA, MD, MA, NH, NM, OR, PA, SD, TX).
Penalties
While not all state statutes limiting or banning noncompetes specify penalties for violation, many do. A few examples provided by the NLR are as follows:
- Colorado: penalty of $5,000 for each worker or prospective worker, injunctive relief and actual damages; employer may also be required to pay reasonable costs and attorneys’ fees, Rev. Stat § 8-2-113;
- District of Columbia: penalty of no less than $350 and no more than $1,000 for each violation; if agreement was entered into after non-compete ban went into effect on October 1, 2022 or if highly compensated employee’s employer failed to give notice of non-compete ban, penalty of not less than $1,000, C. Code § 32-581.04;
- Illinois: penalty not to exceed $5,000 for each violation or $10,000 for each repeat violation within a 5-year period, 820 ILCS § 90/1;
- Maine: penalty of not less than $5,000, 26 Me. Rev. Stat. Ann. § 599-A;
- Virginia: civil penalties of $250 for second violation and $1,000 for third and each subsequent violation, plus attorneys’ fees, fees for expert witness(es) and costs, Code § 40.1-28.7:8; and
- Washington: penalty of $5,000, plus reasonable attorneys’ fees, expenses and costs, RCW §§ 49.62.005 – 900.
To review the entire NLR article on this topic, click on the following link: States of Laws Restricting Noncompete Agreements Nationwide.