On September 5, 2025, the U.S. Federal Trade Commission (FTC) announced a strategic shift in its approach to regulating non-compete restrictions. The FTC voted 3-1 to dismiss its appeals in the cases of Ryan, LLC v. FTC (No. 24-10951, Fifth Circuit) and Properties of the Villages v. FTC (No. 24-13102, Eleventh Circuit), and to accept the vacatur of the Non-Compete Clause Rule by the Northern District of Texas. Had the rule been implemented, it would have prohibited non-compete agreements nationwide, impacting an estimated 30 million workers. On September 8, the Fifth Circuit formally dismissed the Ryan case.
In a joint statement, Chairman Andrew N. Ferguson and Commissioner Melissa Holyoak underscored that, although the FTC remains concerned about the anti-competitive effects of non-competes, it will now prioritize investigating and litigating specific cases rather than defending the rule itself. Commissioner Mark Meador expressed his support for vigorous enforcement against overly broad non-compete provisions. Chairman Ferguson further indicated that companies operating in industries heavily affected by non-competes will soon receive warning letters urging reconsideration of such agreements.
In his concurring statement, Commissioner Meador outlined several factors that will inform future enforcement priorities and actions, including:
- The wage and skill level of workers required to sign non-competes
- The use of non-competes within distribution networks, which may impede horizontal competition
- The use of exclusive dealing arrangements with independent contractors
- The potential for workers to free ride if non-competes are not enforced
- The availability of less restrictive alternatives, such as non-disclosure agreements, customer non-solicitation agreements, and intellectual property protections
- The scope and duration of non-compete clauses, particularly those exceeding one or two years, extending beyond geographic or role-specific boundaries, or restricting workers from unrelated industries
- The employer's market power
- Evidence of economic effects, including reduced labor mobility or increased barriers to market entry
Focus on Enforcement Actions
The FTC has already begun implementing this new enforcement strategy. On September 4, 2025, the FTC filed a complaint against Gateway Services and its subsidiary Gateway US Holdings, Inc. — the largest pet cremation services provider in the United States, with nearly 2,000 employees. The FTC alleges that, beginning in 2019, Gateway required all new employees to sign non-compete agreements regardless of their role, typically prohibiting them from working in the pet cremation industry nationwide for one year post-employment. The FTC further claims that Gateway responded to market entry by new competitors by requiring all employees in affected regions, including hourly workers involved in cremation and transportation, to sign non-competes. According to the FTC, these practices suppressed labor market competition and impeded industry entry and expansion.
Alongside the complaint, the FTC approved a proposed consent order with Gateway, which prohibits Gateway from using non-compete clauses in employment agreements, with limited exceptions, such as in connection with certain qualifying business sales. The proposed consent order also exempts certain employees, including equity holders, individuals with outside business relationships, senior managers, and those with access to confidential information. FTC is seeking public comments on this proposed order.
On the same day, the FTC's Joint Labor Task Force, launched earlier this year, initiated a public inquiry seeking feedback from current and former employees, as well as competitors impacted by non-compete agreements. The inquiry highlighted particular concern for healthcare markets, noting that non-competes involving physicians and nurses may cause significant harm, especially in rural areas with limited medical resources. Comments are due by November 3, 2025.
Given the FTC's abandonment of its nationwide non-compete ban, the enforcement of non-compete restrictions will occur on a case-by-case basis both by the FTC and employers under applicable state law. With its complaint against Gateway and its request for information on specific companies and instances of the use of overbroad non-compete agreements, the FTC is making clear that it will look closely at those agreements that unnecessarily restrict competition. It is possible that the FTC may try to enact a more narrow Rule addressing non-compete agreements in the future. In addition, numerous states have enacted legislation restricting non-competes based on factors such as profession or income level, with four states — California, North Dakota, Minnesota, and Oklahoma — banning nearly all non-compete agreements, with other states having legislation pending. Conversely, states like Pennsylvania and Florida generally enforce reasonable non-compete provisions.
Buchanan attorneys are actively monitoring these developments and are available to advise on their implications for your business. We can assist in preparing public comments in response to the FTC's inquiry and provide comprehensive audit and advisory services regarding non-compete agreements to help your company meet its business objectives.
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