Overview
On September 5, 2025, the Federal Trade Commission (FTC) announced that it would no longer pursue its appeals in Ryan, LLC v. FTC, No. 24-10951 (5th Cir.), and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.), the two district court cases that had declared the FTC's nationwide noncompete rule unlawful.
A quick refresher for those who may have lost track of the legal battle: in August 2024, the FTC issued a final rule banning noncompete agreements nationwide, with limited exceptions for senior executives. At the time, many viewed the move as an overreach of the FTC's rulemaking authority, including then Commissioner (now Chair) Andrew Ferguson and Commissioner Melissa Holyoak. Ferguson issued a sharply worded dissent, stating: "Whatever the Final Rule's wisdom as a matter of public policy, it is unlawful. Congress has not authorized us to issue it. The Constitution forbids it. And it violates the basic requirements of the Administrative Procedure Act." Given the Republican Commissioners' view that the FTC lacks authority to issue substantive rules, it was widely expected that the agency would drop the rule under their leadership, and that is exactly what happened.1
However, the FTC has emphasized that it will continue to pursue illegal noncompete agreements in a more targeted rather than "blanket" approach. In a statement regarding the withdrawal of the appeals and the vacatur of the nationwide noncompete rule, Chairman Ferguson outlined the agency's new enforcement approach:
The Trump-Vance Commission is therefore confronted with a choice. We can continue tilting at windmills by defending the Biden Administration's indefensible rule, or we can get down to the hard business of promoting labor competition and protecting American workers. We choose to protect American workers by doing what Congress told us to do—patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers, and taking bad actors to court.
We have already seen what this case-by-case enforcement might look like. On September 4, 2025, the FTC filed a complaint and proposed consent order against Gateway Services, Inc., the nation's largest pet cremation business. The complaint alleges that Gateway's noncompete agreements — imposed on nearly all employees and typically prohibiting them from working in the pet cremation industry anywhere in the United States for one year after leaving the company — "constitute an unfair method of competition with a tendency or likelihood to harm competition, consumers, and employees in the pet cremation services industry, in violation of Section 5 of the Federal Trade Commission Act." The proposed consent order bars Gateway from using or enforcing most noncompete agreements. It also requires the company to notify employees that their existing noncompetes are no longer valid and limits customer-solicitation restrictions to clients the employee personally worked with during their final year.
The FTC has further confirmed its commitment to weeding out unlawful noncompetes by issuing a request for information in September on employees' noncompete agreements. The inquiry is designed to "better understand the scope, prevalence, and effects of employer noncompete agreements, as well as to gather information to inform possible future enforcement actions." Public comments were due on November 3.
At the state level, many states are beginning to enact rules that limit the use of noncompetes. And four states, two Democrat-led (California and Minnesota) and two Republican-led (North Dakota and Oklahoma), have almost completely banned noncompetes. In 2023, the New York State Senate approved legislation that would have prohibited the use of noncompete agreements. However, Governor Kathy Hochul ultimately vetoed the measure. A substantially similar bill was reintroduced in February 2025 and remains under consideration by the legislature. In New York City, Mayor-Elect Zohran Mamdani campaigned on a platform that included implementing a citywide ban on noncompete agreements and has appointed former FTC Chair Lina Khan to his transition team.
Despite the recent activity in this area and shift in the approach to enforcement, the key takeaway for employers remains largely unchanged. When using noncompete agreements, employers should ensure they are not overly broad in terms of duration or geographic scope and that they are necessary to protect a legitimate business interest. Employers should also be cautious about applying noncompetes to all employees, as it is generally more difficult to justify them for lower-level positions. Those in the healthcare industry should be particularly careful, given the long-standing emphasis on patients' right to choose their healthcare providers. Foreign companies with US subsidiaries that routinely include noncompete clauses in their employment contracts that are lawful and standard in their home jurisdictions should review those provisions for compliance with recent these recent developments in the United States.
1 On October 31, Ric Davidson of Texas and the organization Towards Justice filed a motion to recall the Court's mandate and intervene on behalf of the FTC to file a reply brief in defense of the rule.
