Key Takeaways:
- The FTC's recent court action signals the end of the Commission's efforts to ban non-competition agreements through formal rulemaking.
- Employers should continue to comply with state law in their noncompete practices.
On September 5, 2025, the Federal Trade Commission ("FTC") voluntarily dismissed its appeal of the court rulings prohibiting it from enforcing its Final Rule banning non-competition agreements nationwide. The move signals the end of the FTC's efforts to ban noncompetes through formal rulemaking.
Since April 23, 2024, the FTC has sought to enforce a Final Rule, adopted during the Biden administration, that would have banned the majority of noncompete clauses in all agreements between employers and their workers. The Final Rule was controversial, and came one year and six months after the FTC received over 26,000 public comments on the same proposed rule during the notice and comment period. The Final Rule was quickly challenged in three separate lawsuits: first in Pennsylvania, then Texas, and then in Florida. The courts in Florida and Texas ruled against the FTC, with the Northern District of Texas blocking the Final Rule from going into effect on August 20, 2024. In the last months of the Biden administration, the FTC appealed the losing decisions to their respective circuit courts.
The Trump administration reversed course and halted its efforts to have the Final Rule reinstated. The new FTC Chair, Andrew Ferguson, has explained that the FTC would rather address unlawful noncompete agreements through enforcement actions instead of formal rulemaking. In recent days, the FTC launched an enforcement action against a national company, Gateway Services, Inc., for using noncompete agreements in an effort to restrict worker mobility. The FTC also issued a request for information to "better understand the scope, prevalence, and effects of employer noncompete agreements" and to "gather information to inform possible future enforcement actions." The FTC has thus confirmed it will continue to police noncompete practices on a case-by-case basis.
The FTC's voluntary dismissal of the appeals marks the end of the long and spirited debate over the Final Rule, ensuring that it will never go into effect. For now, employers can continue to operate as usual with respect to their noncompete practices, provided that they comply with applicable state laws. We will continue to monitor the FTC's enforcement actions for further guidance, as well as new laws being passed at the state level that may impact clients' strategies regarding non-competition agreements.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
