FTC Abandons Nationwide Noncompete Ban And Pivots To Case-By-Case Enforcement Actions

The Federal Trade Commission (FTC) has changed its strategy on employment noncompetes by replacing sweeping rulemaking with targeted, case-by-case enforcement coupled with public inquiry. In a flurry of recent actions, the FTC:

• Ended its multi-year effort to broadly ban employee noncompete agreements by taking steps to dismiss appeals of lower court decisions enjoining its final rule that would have prohibited most employee noncompetes nationwide;
• Announced its enforcement action and proposed consent order relative to Gateway Pet Memorial Services based on what the FTC views as unlawful noncompete agreements;
• Issued letters to healthcare and staffing firms urging them to conduct a comprehensive review of their employment agreements, including noncompetes and other restrictive covenants, and
• Launched a public inquiry into noncompete practices that could be problematic.

FTC Noncompete Ban

The FTC issued a final rule (the Rule) banning most non-competes in the employment context throughout the nation, with an effective date of September 4, 2024.

On August 20, 2024, Judge Ada Brown of the U.S District Court for the Northern District of Texas, in Ryan LLC v. Federal Trade Commission, granted summary judgment in favor of the plaintiffs and plaintiff-intervenors. That court's order set aside the Rule on a nationwide basis, concluding that the FTC's promulgation of the Rule was an unlawful agency action.

The FTC, under the Biden administration, appealed the Ryan decision to the Fifth Circuit. It also appealed a preliminary injunction issued by the U.S. District Court for the Middle District of Florida in Properties of the Villages, Inc. v. FTC to the Eleventh Circuit. However, on September 5, 2025, the FTC, now under the Trump administration, moved to dismiss the appeals and to "accede to the vacatur" of the FTCs nationwide noncompete rule. This means that the order in Ryan stands, and the Rule cannot take effect or be enforced anywhere in the country.

Targeted Enforcement

01. Gateway Pet Memorial Services

On September 4, 2025, the FTC announced that it had recently initiated an enforcement action against Gateway Pet Memorial Services, the largest pet cremation company in the country, and its subsidiary (collectively, Gateway), and entered into a proposed consent order with the Company.

In the enforcement action, the FTC charged Gateway with engaging in unfair methods of competition in violation of Section 5 of the Federal Trade Commission Act (FTC Act) based on its use of post-employment covenants not to compete. Gateway's noncompete agreements, which it imposed on all employees (more than 1,780 in total), typically prohibited employees from working in the pet cremation industry anywhere in the United States for one year after leaving the company (except for those employed in California, where state law bans employee noncompetes).

In the complaint, the FTC enumerated aspects of Gateway's noncompete language and practices that it found troublesome, including:

• Requiring noncompete agreements for all newly-hired employees, regardless of their position, responsibilities, or compensation.
• Requiring employees at a facility to enter into noncompete agreements, then closing the facility weeks later and terminating the employees.
• Requiring noncompetes for employees retained through acquisitions with the intention of terminating them post-transaction.
• Restricting employees' freedom to work in their chosen professions, even when Gateway no longer operated in the same area.
• Using noncompetes to directly respond to competitive threats, such as by executing noncompete agreements with employees when a competitor entered a local market.

The FTC concluded that Gateway's noncompetition agreements were impermissibly anticompetitive because they altered employees' bargaining positions, thereby placing them in a worse position to negotiate better terms of employment; denied employees access to job opportunities and restricted their mobility; and suppressed competition by impeding the entry and expansion of competitors in the industry and discouraging employees from opening competing pet cremation businesses.

The proposed consent order, if finalized, would:

• Prohibit Gateway from entering into, maintaining, or enforcing noncompete agreements (with limited exceptions), or communicating to an employee or any other person that any former employee is subject to one;
• Require Gateway to provide notice to employees that they are no longer subject to a noncompete agreement; and
• Prevent Gateway from prohibiting employees in any employment agreement from soliciting prospective, current, or former customers, except with respect to those current or prospective customers with whom the employee had direct contact or personally provided service in the last 12 months of their employment.

02. Chairman Statement

On September 5, 2025, FTC Chairman Andrew F. Ferguson, issued a statement emphasizing the FTC's focus on "patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers and taking bad actors to court." He advised, "in the coming days, firms in industries plagued by thickets of noncompete agreements will receive warning letters from me, urging them to consider abandoning those agreements as the Commission prepares investigations and enforcement actions."

03. Healthcare Employers and Staffing Companies

True to his word, on September 10, 2025, the FTC announced that it sent warning letters to "several large healthcare employers and staffing firms urging them to conduct a comprehensive review of their employment agreements — including noncompetes or other restrictive covenants — to ensure they are appropriately tailored and comply with the law."

In the warning letters, the FTC encouraged the employers to discontinue provisions that are unfair or anticompetitive under the FTC Act and notify relevant employees of the discontinuance. It also acknowledged the vital roles of nurses, physicians, and other medical professionals and opined that unreasonable noncompete provisions could "unreasonably limit health care professionals' employment options and thereby limit patients' choices over who provides their medical care — including, critically, in rural areas where medical services are already stretched thin."

Although the FTC did not expressly define what it considered "unreasonable," it flagged as problematic noncompetes that are: (1) imposed without due consideration to necessity or less restrictive alternatives, (2) overbroad in duration and scope, and (3) applied to roles where they are inappropriate altogether.

Public Inquiry Launched

On September 4, 2025, the FTC launched a public inquiry "to better understand the scope, prevalence, and effects of employer noncompete agreements, as well as to gather information to inform possible future enforcement actions."

To assist in its inquiry, the FTC issued a Request for Information (RFI) seeking details about noncompete agreements such as

• Which employers use noncompetes,
• The roles, positions, and typical salary ranges affected,
• The employer's stated purpose and terms of the noncompetes (such as duration and geographic location), and
• How employers enforce restrictions.

The RFI also solicits examples of employee harms and limitations on starting or operating their own business, difficulties for rival employers, and loss in innovation due to noncompete agreements. Responses to the RFI may be submitted to the FTC confidentially or publicly no later than November 3, 2025.

State Noncompete Laws

In addition to complying with the federal FTC Act, employers must also comply with state noncompete laws applicable in the jurisdictions where they have employees. Whether and to what extent employment-related noncompete provisions are permissible under applicable state law varies widely.

Four states (California, Minnesota, North Dakota and Oklahoma) currently ban employee post-employment noncompete agreements altogether or with very limited exceptions. Many states preclude noncompetes for certain categories of employees (e.g., healthcare providers, broadcasters, hourly employees, low-wage earners, and employees terminated in a reduction in force or without cause). Other states, such as Colorado, Illinois, and Massachusetts, impose various other requirements for the enforcement of noncompetes, such as notice of the right to consult with an attorney, timing of when a noncompete agreement must be given to the employee for pre-signature review, and how much, if any, legal consideration to the employee is required to enforce noncompetes, including garden leave.

Next Steps for Employers

The evolving legal landscape around noncompetes is a bellwether, signaling the need to seek legal advice and consult with counsel for assistance to carefully review existing agreements and craft tailored compliance strategies, such as:

• Auditing existing restrictive covenant agreements, particularly noncompete provisions, to understand their breadth and the categories of employees bound by them. Consider requiring noncompetes only for key employees, namely, those with bona fide access to trade secrets or strategic relationships.
• Ensuring that noncompete terms, especially duration, geographical area, and services prohibited, are narrowly tailored to protect legitimate business interests. Avoid nationwide or lengthy restrictions without strong justification, and steer clear of imposing noncompetes "as a matter of course."
• Monitoring compliance with state noncompete laws, especially if operating with branch offices and/or remote employees in multiple states.
• Deciding whether to respond to the FTC RFI and, if so, submitting your response by November 3, 2025.

Lorna Hebert is an employment, labor, higher education, and litigation attorney with nearly 30 years of experience handling a broad range of complex employment and labor matters. Lorna advises clients on a wide range of employment matters, including workplace investigations, dispute resolution, hiring, performance management, discipline, terminations, reorganizations, accommodations, employee benefits, wage and hour issues, discrimination claims, policies and procedures, and training.

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