Trade Secrets

When the National Non-Compete Ban Fell: Ryan, LLC v. FTC and the Return to Trade-Secret Protection

A Texas federal court set aside the FTC's nationwide non-compete ban for lack of rulemaking authority — and the agency ultimately let the vacatur stand, leaving trade-secret law as employers' primary backstop.

February 11, 2026
Signed employment agreement with a restrictive covenant clause and a pen
The collapse of the FTC's non-compete ban pushed employers back toward trade-secret and contract law to protect competitively sensitive information. Shutterstock
Educational content, not legal advice. This article explains general legal concepts. It does not create an attorney–client relationship. For your specific situation, consult a licensed attorney.

In Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986 (N.D. Tex. Aug. 20, 2024), Judge Ada Brown of the U.S. District Court for the Northern District of Texas granted summary judgment to the plaintiffs and set aside the FTC’s Non-Compete Clause Rule on a nationwide basis. The decision halted what would have been one of the most consequential federal labor-market interventions in decades — a rule that, on its September 4, 2024 effective date, would have voided the vast majority of post-employment non-compete agreements in the United States. The court held that the Commission lacked statutory authority to issue the rule and that the rule was, in any event, arbitrary and capricious under the Administrative Procedure Act. Roughly eighteen months later, the FTC formally abandoned the project, removing the regulation from the Code of Federal Regulations and confirming that the ban is dead.

At a glance

  • Case: Ryan, LLC v. Federal Trade Commission, No. 3:24-cv-00986 (N.D. Tex.).
  • Decision: Memorandum opinion and order granting plaintiffs’ motions for summary judgment and denying the FTC’s cross-motion, entered August 20, 2024, by Judge Ada Brown.
  • What was at stake: The FTC’s Non-Compete Clause Rule, 16 C.F.R. Part 910, which declared most existing and future non-competes an “unfair method of competition” and barred their enforcement as of September 4, 2024.
  • Holding: The FTC lacks substantive rulemaking authority over unfair methods of competition under Section 6(g) of the FTC Act, and the rule was arbitrary and capricious. The rule was set aside with nationwide effect under APA § 706.
  • Aftermath: The FTC appealed to the Fifth Circuit, sought a stay after the change in administration, and on September 5, 2025 voted 3–1 to dismiss its appeals (in Ryan and the parallel Eleventh Circuit case) and accede to the vacatur. The agency completed the rule’s formal removal in early 2026.

The rule the FTC tried to impose

The Non-Compete Clause Rule was sweeping. Adopted in April 2024 on a 3–2 Commission vote, it defined non-compete clauses as an unfair method of competition under Section 5 of the FTC Act and made it unlawful to enter into, enforce, or represent the enforceability of such clauses. For the overwhelming majority of workers, the rule operated retroactively: existing non-competes would become unenforceable on the effective date, with only a narrow carve-out for “senior executives” — a defined population earning above a salary threshold and serving in policy-making positions — whose pre-existing agreements could remain in force. The Commission estimated the rule would affect roughly 30 million workers and projected substantial gains in wages and new-business formation.

The rule’s reach is what made it legally vulnerable. A regulation that retroactively nullifies tens of millions of private contracts and reorders the labor markets of every state is precisely the kind of action courts now scrutinize for a clear congressional mandate. Ryan, a Texas-based tax-services firm, sued within hours of the rule’s adoption; the U.S. Chamber of Commerce and allied business groups intervened as plaintiffs. The plaintiffs sought a stay and ultimately summary judgment, and the court agreed to resolve the merits on a nationwide basis rather than limit relief to the named parties.

The court’s reasoning: no power to make this rule

The decision turned first on authority. The FTC defended the rule as an exercise of its power under Section 6(g) of the FTC Act, which authorizes the Commission “to make rules and regulations for the purpose of carrying out the provisions of” the Act. The agency read that language as a grant of substantive competition rulemaking — the power to define, by regulation, what counts as an unfair method of competition.

Judge Brown rejected that reading. Examining the statute’s text, structure, and history, the court concluded that Section 6(g) is a housekeeping provision authorizing procedural rules, not a font of substantive authority to ban categories of conduct across the economy. The court noted that Section 6(g) carries no penalty for violations — a telling structural signal that Congress did not intend it to create enforceable substantive obligations — and that the Commission had not invoked the provision to issue a substantive competition rule in the agency’s modern history. The placement of the provision among a list of investigative and reporting powers reinforced the conclusion that Congress was describing the Commission’s internal and procedural toolkit, not delegating authority to rewrite the law of competition by fiat.

The court’s authority holding sits comfortably within the contemporary skepticism of expansive agency self-empowerment. While the opinion grounded itself in conventional statutory interpretation, its logic echoes the major-questions sensibility that animates recent Supreme Court administrative-law decisions: an agency claiming the power to resolve a question of vast economic and political significance must point to clear congressional authorization, and an ambiguous, decades-old procedural clause will not do. A nationwide ban on a centuries-old category of employment contract is, by any measure, a major question.

Having found the FTC lacked authority, the court added an independent ground: even if the Commission could regulate here, the rule was arbitrary and capricious. The court faulted the FTC for adopting a categorical, one-size-fits-all prohibition with no end date and no meaningful tailoring. The agency, in the court’s view, failed to justify a blanket ban rather than a more targeted rule, gave short shrift to the legitimate procompetitive uses of non-competes, and did not seriously engage with less-restrictive alternatives or the substantial body of state law that already regulates these agreements. Reasoned decision-making under the APA requires a rational connection between the evidence and the chosen rule; the court found that connection missing.

Trade secrets as the fallback

For employers, the practical consequence of Ryan is that the federal floor they briefly feared never arrived — and the protective tools they already relied on remain in place. Chief among those tools is trade-secret law.

Non-competes and trade-secret protection serve overlapping but distinct functions. A non-compete restrains where and for whom a former employee may work; trade-secret law restrains what information a departing employee may take and use, regardless of where they land. With the broad prophylactic of the non-compete now off the federal table — and increasingly disfavored or banned at the state level — trade-secret enforcement carries more of the load.

The Defend Trade Secrets Act of 2016 (18 U.S.C. § 1836 et seq.) gives employers a federal civil cause of action for misappropriation, including access to ex parte seizure orders in extraordinary cases, injunctive relief, damages, and, for willful and malicious misappropriation, exemplary damages and attorney’s fees. State analogues under the Uniform Trade Secrets Act remain available in parallel. To invoke these protections, an employer must show that the information qualifies as a trade secret — that it derives independent economic value from not being generally known and is the subject of reasonable efforts to maintain its secrecy. That second element is where litigation is often won or lost: confidentiality agreements, access controls, exit interviews, and documented information-security practices are the evidence that turns “valuable information” into a protectable trade secret. Properly drafted non-disclosure and non-solicitation covenants, which face far less hostility than non-competes, round out the toolkit.

Open questions

The Ryan decision resolves the fate of the FTC’s rule, but it leaves real uncertainty at the margins. The court’s statutory holding — that Section 6(g) confers no substantive competition rulemaking power — was a district-court ruling that the FTC chose not to test on appeal; because the agency dismissed its appeal, the Fifth Circuit never issued a binding precedent, and the broader question of the FTC’s competition rulemaking authority remains formally open for some future Commission or court. The agency has also signaled that it will pursue individual non-competes through case-by-case enforcement under Section 5, raising the question of how aggressively, and against whom, it will act. And the patchwork of state law continues to shift, with several states tightening or banning non-competes outright, so the compliance picture varies sharply by jurisdiction.

Implications

  • The national ban is dead, but non-competes are not federally safe everywhere. State law — not a uniform federal rule — now governs enforceability, and that law is trending against broad covenants.
  • Trade-secret hygiene is the durable strategy. Reasonable secrecy measures are both a litigation prerequisite and the best protection that survives any change in non-compete policy.
  • Narrow, well-tailored covenants travel better. Non-disclosure and non-solicitation provisions, and narrowly scoped non-competes for genuinely senior personnel, are more defensible than blanket restrictions.
  • Expect enforcement, not retreat. The FTC has framed its withdrawal of the rule as a pivot to targeted actions, so high-profile or abusive non-compete practices remain exposed.
  • Watch the appellate vacuum. Because no court of appeals ruled, the authority question could resurface if a future Commission revives competition rulemaking.

Frequently asked questions

Did the court declare all non-competes illegal or legal? Neither. The court did not rule on whether non-competes are good or bad policy. It held only that the FTC lacked the legal authority to ban them by rule and that the rule failed APA reasoned-decision-making standards. The enforceability of any given non-compete continues to be governed by the law of the relevant state.

Is the FTC’s rule completely gone, or could it come back? The rule has been formally removed from the Code of Federal Regulations, so it has no current legal effect. A future Commission could attempt a new rule, but it would confront the same authority problem the court identified — and would need a stronger statutory hook or different legal theory.

What should employers rely on now to protect competitive information? Trade-secret protection under the Defend Trade Secrets Act and state law, backed by robust confidentiality measures, plus narrowly drafted non-disclosure and non-solicitation agreements. These tools do not depend on the contested non-compete framework and remain fully available.

Authorities and sources