The Noncompete Ban Died in Court. The Executives It Would Have Freed Are Still Bound.

The story everyone told about the FTC's noncompete ban was that it died and took mobility restrictions down with it. That story has the mechanism backwards. The ban would have freed executives specifically — it had only a narrow carve-out for existing senior-executive agreements. What actually survived its death is a state-by-state patchwork whose income thresholds are calibrated almost exactly at the line separating hourly workers from the people ETHOSLINK places.

How the ban actually died

• 2024The FTC finalizes a nationwide rule banning most noncompete agreements, with only a narrow exception preserving existing agreements for senior executives.
• August 2024A federal district court in Ryan LLC v. FTC enjoins enforcement of the rule nationwide before it takes effect.
• November 2024The Fifth Circuit upholds the injunction, finding the FTC lacked the legislative rulemaking authority to impose a nationwide ban on noncompetes.
• September 2025Under Chair Andrew Ferguson, the FTC withdraws its appeals in both Ryan LLC v. FTC (5th Cir.) and Properties of the Villages v. FTC (11th Cir.), formally ending the nationwide ban effort.
• 2026With no federal rule and no imminent new rulemaking expected, states that had already built their own noncompete restrictions become the entire regulatory landscape — and several move to tighten, not loosen, executive-level enforceability.

Read quickly, the sequence looks like deregulation: a federal ban dies, so the restriction it would have imposed goes away. But the FTC's rule would have banned noncompetes for almost everyone, executives included — its senior-executive exception only grandfathered agreements already in place. Its death did not restore a noncompete-free market for executives. It left the field to state law, which was never built around a blanket ban in the first place.

The thresholds sit at the executive line, not below it

Eleven states and Washington, D.C. use an income-threshold model: a noncompete is void below a set compensation level and remains enforceable above it. According to the National Law Review's 2026 federal and state overview, current thresholds include Colorado at $130,014, Illinois at $75,000, Oregon over $70,000, and Tennessee's new $70,000 floor effective July 1, 2026. Washington's prior law set the line at $123,394 before the state changed course entirely (more on that below).

The design logic is explicit in the legal commentary: threshold laws "preserve enforceability for executives where employers can plausibly claim a protectable interest, while ending the practice of imposing non-competes on warehouse staff, fast-food workers, and hourly retail employees," per the restrictive covenant tracking that informs these thresholds. That is a deliberate policy choice, not an oversight — but it means the segment of the labor market most affected by 2025's federal deregulation story is precisely the segment least affected by it in practice.

Two states, two opposite bets

The patchwork isn't uniform, and the two most consequential 2026 moves point in opposite directions — worth knowing if your portfolio companies or search mandates touch either state.

Washington went further than any threshold state. ESHB 1155, signed March 23, 2026, flips the state from an income-threshold regime to a near-total ban on noncompetes effective June 30, 2027 — the first state to move from threshold protection to a blanket ban after already having a threshold law on the books. This one cuts the other way: it makes Washington noncompetes, including executive-level ones, harder to enforce than under the old $123,394 line, not easier.

Florida moved the opposite way on purpose. The state's CHOICE Act allows employers to enforce noncompetes for up to four years for higher-compensated employees, provided the employer continues paying salary and benefits — a garden-leave structure — during the restricted period. Massachusetts runs a related model: a noncompete is enforceable only against FLSA-exempt employees, with strict notice requirements and a mandatory garden-leave payment of 50% of salary during the restriction, capped at twelve months.

The garden-leave trend is the detail worth underwriting into any retention or hiring plan. Enforceability in Massachusetts and Florida is no longer a free legal restriction — it is a purchased one, priced at half salary or full salary and benefits for the restricted window. That changes the calculation for a PE sponsor deciding whether to lock up a departing CFO or CRO from an equally uncertain angle: is the mobility restriction worth the cash flow it now costs to enforce?

What this means for portfolio company leadership

This lands directly on the mid-hold window we've written about before, where PE's most expensive leadership pattern clusters around year two and boards are already deciding whether to replace an operator who isn't fitting the deal thesis. Executive-level noncompetes surviving largely intact in most states means two things simultaneously for a sponsor: it is harder to poach a competitor's proven operator into your portfolio company, and it is easier to hold onto your own if the agreement is drafted at the right compensation level. The fractional bridge model becomes more valuable in states with strong enforceability, since it lets a sponsor deploy interim leadership immediately rather than waiting out a restricted period a court is actually likely to enforce.

It also complicates the retention logic we've covered in The Counteroffer Trap. A counteroffer that "saves" an executive on paper is a different proposition in a state where that executive's next move is genuinely restricted by an enforceable agreement, versus a state where it isn't. And it adds a legal layer to the passive-candidate reluctance we quantified in The Standstill Market: some of that reluctance to move is quits-rate psychology, and some of it, for the executive tier specifically, is now a real contract sitting in a drawer with a threshold number on it that a 2026 state legislature, not the FTC, wrote.

None of this means executive noncompetes are airtight everywhere, or that Washington's shift signals a national trend — it is one state, moving alone, on a three-year runway. But the headline framing of 2025 — ban dies, mobility opens up — was built for the wrong income bracket. For the executives ETHOSLINK places, the operative law was never really the federal rule. It was always the state threshold sitting a few thousand dollars below their base salary, and that law didn't go anywhere when the FTC did.