Where Michigan Noncompetes Stand After the Federal Ban Collapsed

In 2024, it briefly looked like noncompete agreements were about to disappear across the country. A new federal rule would have made almost every post-employment noncompete unenforceable, and many business owners assumed the agreements they had in place were about to become worthless. That is not how things turned out. As of 2026, there is no federal ban, Michigan's own noncompete law is unchanged, and a bill that would ban most noncompetes in this state is sitting in the Legislature. Here is where the ground actually stands for a Michigan business.

The FTC's Attempt to Ban Noncompetes Nationwide

In April 2024, the Federal Trade Commission issued its Non-Compete Clause Rule, a regulation that would have banned nearly all post-employment noncompete agreements between employers and workers nationwide, with the ban set to take effect on September 4, 2024. For a stretch in 2024, that rule was the reason a lot of employers believed their noncompetes were on their way out.

Why the Federal Noncompete Ban Never Took Effect

Before the rule could take effect, a federal court blocked it. In Ryan LLC v. FTC, the U.S. District Court for the Northern District of Texas set the rule aside nationwide on August 20, 2024, holding that the FTC had exceeded the authority Congress gave it and that the rule was arbitrary and capricious. Because of that ruling, the rule never went into force.

The FTC initially appealed to the Fifth Circuit. Then the agency's leadership changed, and in September 2025 the Commission voted to drop the appeal and accept the rule's vacatur. It formally removed the rule from the books in a Federal Register action published on February 12, 2026. The practical result is that there is no federal noncompete ban: state law ordinarily supplies the enforceability rules, subject to case-specific federal antitrust and FTC Act enforcement.

The FTC Still Targets Noncompetes Case by Case

Ending the rule did not end the agency's interest in the subject. The FTC has said it will continue to challenge noncompetes on a case-by-case basis under Section 5 of the FTC Act rather than through a single blanket rule. Since dropping the rule it has sent warning letters to healthcare employers and staffing firms and entered orders requiring individual companies to stop enforcing existing noncompetes. In April 2026, the agency accepted a proposed consent order against Rollins, Inc. and sent warning letters to 13 other pest-control companies, then finalized the Rollins order in June 2026, requiring the company to stop enforcing noncompetes against more than 18,000 employees. The takeaway for an employer is that a sweeping or clearly overbroad noncompete, particularly one applied to rank-and-file or lower-wage workers, can still draw federal attention even though no general ban exists.

Are Noncompete Agreements Enforceable in Michigan?

Employee noncompetes in Michigan are governed by MCL 445.774a. Under that statute, an employer may hold a former employee to a noncompete if the agreement protects the employer's reasonable competitive business interests and is reasonable in three respects: its duration, its geographic area, and the type of employment or line of business it restricts.

Michigan also gives courts room to save an agreement that goes too far. If a court finds a noncompete unreasonable in some respect, it may limit the agreement to make it reasonable and enforce it as narrowed, rather than striking it down entirely. In practice that means an overbroad noncompete is not automatically void, but the employer may end up with far less protection than the document on its face appears to provide.

The statute sets no fixed numbers, and reasonableness is decided on the facts of each case. Michigan courts have upheld one- and two-year restrictions in appropriate circumstances, but no duration is automatically reasonable. As a general matter, a noncompete tied to a genuine competitive interest, limited to a sensible geographic area, and no broader or longer than its purpose requires is on much firmer ground than one that runs for many years, covers a wide territory, or applies to every employee regardless of role.

Could Michigan Ban Noncompete Agreements? (House Bill 4040)

There is also a state-law development worth watching. House Bill 4040, introduced in January 2025, would largely prohibit businesses from entering into or enforcing noncompete agreements with workers, amending the same statute that governs employee noncompetes today, MCL 445.774a. Its principal exception concerns owners selling a business or an ownership interest and workers responsible for selling all or substantially all of a business's operating assets. The introduced bill would cover employees, independent contractors, interns, volunteers, apprentices, and other workers, and would apply to agreements entered into before, on, or after its effective date.

As of July 2026, the bill remains in the House Committee on Economic Competitiveness, with no recorded action since shortly after its January 2025 introduction, and it has not become law. It changes nothing today, but a bill that would rewrite Michigan's noncompete statute is worth tracking rather than dismissing.

What This Means for a Michigan Business Owner

• Existing agreements remain potentially enforceable. The collapse of the federal rule did not make Michigan noncompetes unenforceable, and it did not make them bulletproof either. They rise or fall on Michigan's reasonableness standard and on ordinary contract defenses.
• Review scope now. Long durations, no geographic limit, or a noncompete applied to every employee regardless of role are the agreements most vulnerable in court and can increase regulatory risk, particularly when imposed broadly on lower-wage workers.
• Match the restriction to the interest. Tie a noncompete to real competitive interests such as customer relationships, confidential information, or specialized training, and to the employees who actually implicate those interests.
• Consider narrower tools, but review them carefully. Confidentiality and trade-secret agreements would remain expressly available under HB 4040. Certain nonsolicitation agreements also could remain enforceable, but the introduced bill imposes a compensation threshold and a one-year duration limit. A customer-protection clause drafted so broadly that it effectively prevents other employment could still be treated as a prohibited noncompete.
• Watch HB 4040. A bill that would sharply restrict Michigan noncompetes is pending in the Legislature, so it is worth tracking rather than assuming today's rules are permanent.

The short version: the headline-grabbing federal ban is gone, but noncompetes in Michigan were never a settled, one-size-fits-all matter, and they are less so now. A noncompete that is carefully scoped to a legitimate business interest remains a useful tool; one that overreaches is both harder to enforce and easier to challenge.

These questions come up regularly in the firm's Michigan corporate and business law practice. As a related Michigan employment-agreement case shows, precise drafting is often what separates an enforceable agreement from one a court will not stand behind.

Frequently Asked Questions

Did the FTC ban noncompete agreements?

No. The FTC issued a rule in 2024 that would have banned most employee noncompetes, but a federal court struck it down before it took effect. In 2025 the FTC dropped its appeal, and in early 2026 it removed the rule entirely. There is no federal ban; state law ordinarily supplies the enforceability rules, subject to case-by-case FTC Act enforcement.

Are noncompete agreements still enforceable in Michigan?

Yes. Employee noncompetes remain enforceable under MCL 445.774a if they protect a reasonable competitive business interest and are reasonable in duration, geographic area, and line of business. A Michigan court can also narrow an overbroad agreement and enforce it as limited rather than voiding it.

How long can a noncompete last in Michigan?

Michigan's statute sets no fixed time limit, and no duration is automatically reasonable; reasonableness is decided case by case. Michigan courts have upheld one- and two-year restrictions in appropriate circumstances, but shorter, narrowly tailored restrictions are easier to enforce.

Is the FTC finished with noncompetes?

No. It has shifted from a single nationwide rule to case-by-case enforcement under Section 5 of the FTC Act, including recent orders and warning letters aimed at large employers. Overbroad noncompetes can still draw federal scrutiny.

Could Michigan ban noncompetes?

Possibly. House Bill 4040, introduced in 2025, would largely prohibit businesses from entering into or enforcing noncompete agreements with workers, with a principal exception for the sale of a business or an ownership interest. As of July 2026 it remains in committee and has not become law.

What should I do with my company's noncompetes now?

Review them for scope, tie them to real business interests and to the employees who implicate those interests, and consider whether a nonsolicitation or confidentiality agreement would achieve the same protection with less risk. An attorney can help you assess whether a given agreement is likely to be enforced.

Please note: This article is provided for general educational and informational purposes only and does not constitute legal advice. Reading it does not create an attorney-client relationship between you and the Law Offices of Maynard F. Newman, P.L.L.C. This area of law is changing quickly and every situation is different; you should consult a qualified attorney before relying on anything described here. This content may also be considered attorney advertising.