In September 2025, the Federal Trade Commission (“FTC”) officially abandoned its bid to uphold and enforce its prior rule that banned non-compete clauses in employment agreements under most circumstances, while simultaneously launching a public inquiry on this issue. As reported in April 2024, the FTC had published a new rule that sought to ban non-compete clauses in employment contracts, with only certain exceptions allowed. The rule was quickly challenged in litigation by interested groups – most notably in Ryan LLC, et al v. FTC. In Ryan, the plaintiffs successfully argued that the FTC lacked rulemaking authority with respect to unfair methods of competition, and that the FTC exceeded its statutory authority in promulgating the new rule. As a result, in August 2024, the court issued an injunction, blocking implementation of the rule. The FTC then appealed that decision in October 2024.
Fast forward to January 2025, the legal battle over the new rule remained unresolved. While the FTC had appealed the ruling in Ryan, the new Trump Administration quickly signaled its intent to reevaluate the appeal, and in March 2025 filed to stay the matter. Since that time, the status of the appeal was in limbo.
This fall, in September 2025, the FTC finally abandoned that appeal and is no longer defending its prior non-compete rule. As a result of the FTC dropping its appeal, the enforceability of non-competes (including determinations on unfair business practices) largely falls back to the states. Accordingly, for the time being, it is “business as usual” on this issue. Employers should continue their practices concerning non-competes and restrictive covenants within the confines of applicable state law, which is ever evolving. In assessing employer practices, employers should seek advice of counsel, especially when employment relationships span multiple states.
Although the FTC has abandoned its prior rule, employers should remain alert to future action by the FTC to limit non-competes, as the FTC is still interested in limiting or defining anti-competitive behavior. Specifically, the day before dropping its appeal in court, the FTC launched a public inquiry on September 4, 2025, with the purpose of taking a closer look at the impact and scope of non-compete agreements. The FTC indicated that more rules may follow, stating that “unreasonable non-compete agreements have proliferated for too long in the dark. With the assistance of the employees and workers most burdened by them, the Trump-Vance FTC intends to uproot the worst offenders and restore fairness to the American Labor market.”
We will continue to monitor the FTC for any new or proposed guidance.