Overview
On January 27, 2026, Federal Trade Commission (FTC) Commissioner Mark Meador outlined the FTC's new approach to noncompetes. While the Biden FTC under Chairwoman Lina Khan had sought a blanket ban on noncompetes, the Trump FTC, led by Chairman Andrew Ferguson, has chosen a case-by-case approach using contextual factors to determine whether a noncompete unlawfully restrains competition.
This shift was highlighted at the FTC's Workshop on Protecting Workers from Anticompetitive Noncompete Agreements. At this event, Meador gave a speech describing the harms of noncompetes. He opened by recognizing that noncompetes can serve a competitive purpose in limited contexts, namely where the "workers' skill sets . . . require some mastery," are "niche" or "uniquely specialized," and the employer would be disadvantaged by the employees choosing to work elsewhere.
But, in his view, the majority of noncompetes do not cover those cases. Instead, they are aimed at professions like bartenders and nurses, making their lives harder and less affordable by preventing them from switching to higher-paying jobs or negotiating higher wages. To distinguish the noncompetes that may pass antitrust muster from those that would not, Meador began by focusing on three contextual issues.
First, what are the wages and skill levels of the employee? If an employee lacks extensive training, has limited access to nonpublic information, and is not performing specialized functions, a noncompete likely harms worker mobility and does not make sense. In instances where they do have extensive training, access to nonpublic information, and perform specialized functions, a noncompete may make sense. Even then, though, the noncompete needs to be tailored in its scope and duration.
Second, is the noncompete restricting employee movement in a distribution network? Meador referenced the franchise context, where noncompetes can prevent independent operators from competing for employees.
Finally, for the independent-contractor context, Meador said the FTC should consider whether the contractor operates under exclusive terms or receives dedicated resources or training.
Next, Commissioner Meador laid out the legal factors that the Commission should use.
- Free riding. If an employer has significantly invested in training, it would cut in favor of finding a noncompete agreement justified. But Meador cautioned against simply taking the employer's word. In his words, although he "ha[s] strong opinions about the best way to pour a Guinness," it is not the type of proprietary knowledge that makes a noncompete appropriate for bartenders.
- Less restrictive alternatives. Meador flagged that in many circumstances, a nondisclosure agreement may address the problem of proprietary information without restricting workers' mobility.
- Scope and duration of a noncompete. Meador also noted that noncompetes need to have a reasonable scope and duration. Noncompetes exceeding a year or two or with excessive geographic scope could be problematic.
- Market power. Meador also raised that market power could trigger additional competitive concerns, as there may only be a handful of buyers for an employee's labor.
- Economic effects. Meador also drew attention to the prevalence of noncompetes in an industry. For instance, does the entire industry use noncompetes? Are there no-poach agreements among competitors? Can employers demonstrate procompetitive justifications for the noncompete that overcome the anticompetitive effects?
Meador's approach reflects a marked shift from the Biden FTC. Rather than banning all noncompetes, the Trump FTC will evaluate them on a case-by-case basis. This does not mean, though, that the FTC views them favorably or even neutrally. Meador's speech repeatedly recognizes that noncompetes are overused and harm workers for no good economic reason. Despite this skepticism of noncompetes, his speech hints that the agency will focus primarily on low-wage workers.
Given this speech, employers should expect more investigations into noncompetes. Employers should anticipate increased FTC scrutiny, including:
- Investigations of existing noncompetes, especially for lower-paid or non-specialized roles.
- More detailed inquiries into the economic effects of noncompetes on labor markets.
- Potential challenges where noncompetes are coupled with other restrictive practices (e.g., no-poach agreements).
Employers should review their noncompete agreements with an eye toward the factors outlined in Meador's speech:
- Tie noncompetes to legitimate interests. Ensure they are justified by investments in training or protection of genuine proprietary information.
- Consider alternatives. Favor alternatives such as nondisclosure agreements where appropriate.
- Limit scope and duration. Keep restrictions reasonable – generally no more than one to two years and geographically tied to where the employer actually operates.
- Document the rationale. Maintain evidence of training costs, access to proprietary information, or other competitive considerations that could justify a restraint.
- Watch broader practices. Be mindful of industry norms, and avoid arrangements with competitors that could be viewed as coordinated restrictions on labor.
Finally, employers should also be aware of state requirements and private plaintiffs. Many states restrict or ban noncompetes. Even in states where noncompetes are permitted, employers should monitor whether attorneys general in those states embrace similar principles.
For private plaintiffs, this speech may embolden the plaintiffs' bar to begin challenging more noncompetes, especially at large employers.
