Earlier this week, the US Court of Appeals for the Fifth and Eleventh Circuits dismissed the Federal Trade Commission's (FTC) pending appeals in its defense of the FTC's Non-Compete Rule, granting the FTC's unopposed motions to voluntarily dismiss the cases. This marks the end of a yearslong effort by President Joe Biden's FTC to ban virtually all employee noncompete agreements nationwide through the FTC's formal rulemaking process.
The Rule, which was finalized in 2023 and originally scheduled to take effect in 2024, was immediately challenged in federal court and subsequently enjoined on a nationwide basis. At the time, the FTC, which was under Democratic control and led by Chair Lina Khan, appealed the injunctions to both the Fifth and Eleventh Circuits. After the inauguration of President Donald Trump, however, it was widely expected that the FTC, now under Republican control, would withdraw the pending appeals and abandon the Non-Compete Rule altogether. This prediction has proven correct and the FTC Non-Compete Rule is now officially dead.
While employers no longer need to worry about the FTC Non-Compete Rule, they must still be cognizant of state and local laws restricting the use of noncompete provisions in employment agreements. And jurisdictions without comprehensive legislation covering noncompetes may revisit and seriously consider passing legislation to significantly curb the use of noncompete provisions. For example, earlier this year and in the absence of the FTC's Non-Compete Rule, the New York State Senate passed a comprehensive bill banning the use of noncompete agreements for any worker earning less than $500,000 per year or in a "sale of business" context, so long as the restrictions meet a set standard. The bill has not yet been voted on by the New York Assembly, though we expect momentum to pick back up given the FTC's abandonment of the nationwide Non-Compete Rule.
Even without the Non-Compete Rule, the FTC continues to file complaints against employers that maintain and enforce restrictive covenants the commission finds problematic. For instance, on September 4, 2025, the day before the FTC filed the motions to abandon its defense of the Non-Compete Rule, the FTC announced that it had ordered the largest pet cremation business to stop enforcing noncompete agreements that bind nearly 1,800 workers. In addition, 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. Clearly, as Chair Andrew Ferguson explained, the FTC intends to continue to "enforce the antitrust laws aggressively against noncompete agreements," presumably on a case-by-case basis.
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These developments do not require any reassessment of employers' use of restrictive covenants, but all employers are advised to review their practices from time to time to ensure they are consistent with recent developments in various jurisdictions and are designed to maximize the enforceability of those provisions.
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