Non-Compete vs. Non-Solicitation

A non-compete clause restricts a party from working for or operating a competing business entirely, while a non-solicitation clause restricts only the narrower act of soliciting specific clients or employees, a meaningfully smaller restriction on the same person's ability to earn a living. The FTC's 2024 nationwide Non-Compete Rule never took effect, was vacated in Ryan LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), and the FTC itself abandoned its appeal in September 2025 and formally removed the rule from the Code of Federal Regulations effective February 12, 2026, meaning enforceability today runs entirely through state law rather than any federal ban. 

Non-solicitation clauses are generally treated as more enforceable than non-competes across most states, but California's AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018) has substantially eroded that assumption within California specifically, voiding even narrow employee non-solicitation clauses under Cal. Bus. & Prof. Code § 16600. This article covers the FTC rule's full resolution, why non-solicitation clauses are usually more enforceable, California's erosion of that assumption, the exceptions that still survive, and broader state-by-state variation. Employees and employers evaluating an existing restrictive covenant, businesses drafting a new employment agreement, and anyone trying to determine whether a specific clause would actually hold up in the applicable state all rely on this framework.

What Is the Difference Between a Non-Compete and a Non-Solicitation Clause?

A non-compete clause is a contract provision barring a party from working for a competing business or operating a competing venture within a defined time period, geography, and scope of activity. A non-solicitation clause is a contract provision restricting only a narrower category of conduct, commonly barring a departing employee from actively soliciting the former employer's clients or recruiting its remaining employees, while leaving the departing party free to work anywhere else, including for a direct competitor.

Three things this comparison is not.

1. Not a claim that non-solicitation clauses are universally safer than non-competes. California's case law shows this general assumption breaks down significantly within that specific state.
2. Not governed by a current federal ban. The FTC's Non-Compete Rule was vacated in full and formally removed from the Code of Federal Regulations, leaving no nationwide restriction in place today.
3. Not a single national standard. Enforceability of both clause types depends heavily on the specific state governing the agreement, and no uniform rule applies identically everywhere.

The FTC's Non-Compete Rule: What Happened and Where Things Stand Now

The Federal Trade Commission finalized a nationwide Non-Compete Clause Rule on April 23, 2024, that would have voided nearly every existing employee non-compete agreement in the country. The rule represented the agency's most ambitious attempt to date at directly regulating restrictive covenants on a national scale rather than leaving the question to individual states.

The rule never took effect. The U.S. District Court for the Northern District of Texas vacated the rule nationwide in Ryan LLC v. FTC, 746 F. Supp. 3d 369 (N.D. Tex. 2024), holding the FTC lacked statutory authority to promulgate substantive rules defining unfair methods of competition under the FTC Act. The court reached this conclusion on the merits after full briefing, finding the rule both exceeded the agency's authority and was arbitrary and capricious.

The FTC initially appealed the decision, but the litigation's trajectory changed with a shift in the agency's own leadership. On September 5, 2025, the Commission voted 3-1 to dismiss its appeals in both Ryan and a parallel Eleventh Circuit case and to accede to the vacatur entirely. The agency formally removed the rule from the Code of Federal Regulations effective February 12, 2026, closing out the entire episode.

No federal non-compete ban exists today as a direct result of this history. Any future nationwide restriction on non-compete agreements would require an entirely new rulemaking effort or an act of Congress, since the courts already rejected the specific statutory theory the FTC relied on the first time. State law now serves as the sole governing framework for restrictive covenant enforceability, and this arrangement will likely remain the status quo for the foreseeable future.

Why Non-Solicitation Clauses Are Usually Treated as More Enforceable

Non-solicitation clauses are generally treated as more enforceable than non-competes across most states, since they restrict a narrower category of conduct than a full competitive bar. A non-solicitation clause permits the departing party to work anywhere, including for a direct competitor, while restricting only the act of soliciting specific clients or recruiting specific former colleagues. Courts weighing reasonableness generally favor this narrower restriction over a full employment bar, since the departing party retains considerably more freedom to pursue their livelihood while the employer still receives meaningful protection against direct poaching of its client relationships or workforce.

California's Exception: How AMN Healthcare Eroded the Non-Solicitation Safe Harbor

AMN Healthcare, Inc. v. Aya Healthcare Services, Inc., 28 Cal. App. 5th 923 (2018), held that an employee non-solicitation clause applied to travel nurse recruiters was void under Cal. Bus. & Prof. Code § 16600. Former recruiters who left AMN for a competing staffing agency, Aya, had signed agreements barring them from soliciting AMN employees for one year after departure. The California Court of Appeal found this restriction unlawful, reasoning that because the recruiters' entire profession consisted of recruiting healthcare staff, a clause barring them from soliciting a specific employer's workforce effectively restrained them from practicing their chosen profession at all.

The precise reach of this holding remains genuinely disputed, and courts applying it since have not resolved the question uniformly. Some courts read AMN Healthcare narrowly, confined to its specific facts involving a profession built entirely around recruitment. A federal district court reached a broader conclusion in WeRide Corp. v. Kun Huang, extending the holding to find employee non-solicitation agreements void under California law more generally, rejecting the argument that AMN's reasoning should be limited to the recruiting industry alone. This split in how subsequent courts read the same precedent means the practical scope of California's erosion of the non-solicitation safe harbor is not settled with complete uniformity.

Edwards v. Arthur Andersen LLP, 44 Cal. 4th 937 (2008), laid the foundation this later erosion built upon. The California Supreme Court invalidated a customer non-solicitation clause under § 16600 in that earlier decision, establishing the state's broad hostility to restrictive covenants generally, while leaving the specific question of employee non-solicitation clauses open for the courts that followed to resolve.

The Trade Secret and Sale-of-Business Exceptions That Still Work in California

A trade secret exception remains available even within California's otherwise hostile framework. A non-solicitation clause tied specifically to protecting genuine trade secret information can survive § 16600 scrutiny where the clause is properly drafted to connect the restriction directly to that protectable interest, rather than functioning as a general restraint on the departing employee's ability to compete or recruit.

A sale-of-business exception exists separately under Cal. Bus. & Prof. Code §§ 16601-16602, permitting a non-solicitation or non-compete restriction in connection with the sale of a business or the dissolution of a partnership or limited liability company. This narrow statutory carve-out operates outside the general prohibition entirely, reflecting the legislature's judgment that a business sale context justifies different treatment than an ordinary employment relationship.

State Variation Beyond California

State-level restrictive covenant legislation continues actively developing well beyond California's own framework. Utah's healthcare-worker non-compete ban takes effect May 6, 2026. Tennessee's new $70,000 annualized compensation wage floor takes effect July 1, 2026, barring non-compete enforcement below that income threshold. Virginia's severance-or-void rule also takes effect July 1, 2026. Washington has signed a near-total non-compete ban into law, though it does not take effect until June 30, 2027.

This ongoing legislative activity confirms the landscape remains genuinely unsettled at the state level, even after the federal rule's collapse. States continue enacting new restrictions on their own timelines, and the current picture as of any given date reflects an active, evolving body of law rather than a fixed, settled national standard.

Common Misunderstandings About Non-Compete and Non-Solicitation Clauses

Common misunderstandings about these two clause types fall into five categories, and each creates a distinct risk for a party relying on an incorrect assumption.

1. Assuming a federal non-compete ban is currently in effect, when the FTC's rule was vacated, the agency abandoned its own appeal, and the rule has been formally removed from the Code of Federal Regulations.
2. Assuming non-solicitation clauses are automatically safer everywhere, including in California, when AMN Healthcare has substantially undermined that assumption within the state.
3. Assuming AMN Healthcare's holding applies only to nurse recruiters and nothing else, when at least one federal court has extended the reasoning to employee non-solicitation clauses generally.
4. Assuming the trade secret exception applies automatically without a properly drafted connection to protectable information, when a vague or overbroad clause fails to qualify for this narrow carve-out.
5. Assuming state non-compete law is now settled simply because the federal rule collapsed, when states continue actively enacting new restrictions on their own separate timelines.

Non-Compete vs. Non-Solicitation: Complete Reference Table

Conclusion

There's no federal ban on non-competes today, despite years of expecting one, since the FTC's 2024 rule was vacated in court, the agency abandoned its own appeal in September 2025, and the rule was formally stripped from federal regulations in February 2026, leaving enforceability to run entirely through state law. The usual assumption that a narrower non-solicitation clause is automatically safer than a full non-compete doesn't hold everywhere either, since California's AMN Healthcare decision has voided employee non-solicitation clauses under specific circumstances, with at least one federal court reading that reasoning even more broadly than the original case did. A trade secret connection or a sale-of-business context can still preserve a restriction even in California, and states from Utah to Tennessee to Washington keep enacting their own new restrictions on separate timelines, meaning the landscape a clause was drafted under can shift well before an employee ever tries to enforce or challenge it. To find out whether a specific non-compete or non-solicitation clause would actually hold up in your state, an employment contract attorney review checks it against current law before you sign.