FTC Chair throws a curveball

Wondering why the FTC has not yet dismissed its appeals of the rulings on the FTC’s noncompete ban in the 5th Circuit (Ryan) case or the 11th Circuit (Properties of the Villages) case? Me too.

Well, in addition to having a deadlocked Commission, with the two Democrats who voted for the noncompete rule and the two Republicans who voted against it, here is a datapoint…

Yesterday (February 26, 2025), FTC Chair Ferguson issued a memorandum titled, “Directive Regarding Labor Markets Task Force.”

In that memo, Chair Ferguson writes:

The Federal Trade Commission has a dual mandate to protect the American people from unfair or deceptive practices and unfair methods of competition. Historically, the large majority of the FTC’s consumer protection and competition enforcement efforts have focused on protecting Americans in their role as consumers. Protecting consumers will always be central to the FTC’s mission and statutory mandate, but it is important to remember that the FTC’s authority includes protecting the same American consumers in their roles as workers.

* * *

Sadly, deceptive, unfair, and anticompetitive labor practices are widespread. They are as varied as they are unscrupulous. They affect workers in all types of industries. And as far as the FTC is concerned, they trigger our mandates to fight unfair or deceptive practices and unfair methods of competition. Some notable examples of conduct that falls under the FTC’s jurisdiction include:

• • • No-poach, non-solicitation, or no-hire agreements, where employers agree to refrain from hiring each other’s employees. Courts have found these agreements can be so pernicious as to be a per se violation of the competition laws.

* * *

• • • Noncompete agreements, which employers can use to impose unnecessary, onerous, and often lengthy restrictions on former employees’ ability to take new jobs in the same industry after they leave their employment.

* * *

• • • Labor-contract termination penalties, through which an employer can impede its workers from switching to a competing employer by imposing unjustified fees when workers want to end their contracts.

This is not actually inconsistent (some¹ might even say that it is consistent) with Chair Ferguson’s position on noncompetes (and other worker-related agreements) all along.

As you may recall he and Commissioner Holyoak issued a 45-page dissent to the noncompete rule. In that dissent, they said as follows:

There are sound arguments in favor of regulating noncompete agreements. Every State does. .  . .

* * *

Noncompete agreements are not the type of agreements that the antitrust laws categorically proscribe. The antitrust laws do not treat vertical restraints as inherently anticompetitive. Rather, whether a vertical agreement violates the antitrust laws depends on its unique terms and effects. That is how federal courts have always analyzed vertical noncompete agreements under the antitrust laws. This antitrust principle aligns with the common law, which has for centuries approached the validity of noncompete agreements on a case-by-case, rather than a categorical, basis. Given the overwhelming tradition of assessing noncompete agreements on a case-by-case basis, the Commission’s categorical approach must be buttressed by very compelling evidence. But the evidence does not support a categorical rule. Rather, it demonstrates what experience teaches: that sometimes noncompete agreements have anticompetitive effects, and other times they have procompetitive effects.

Accordingly, while I don’t think the FTC will pursue the noncompete rule, and, to the contrary, I still expect it to dismiss the appeals (and underlying case in Florida), this does suggest that the FTC may pursue individual cases where noncompetes are, in the FTC’s view, abusive or otherwise deceptive, unfair,  anticompetitive, or unscrupulous.

Given the language, I expect we’ll see the FTC go after:

• B2B no-poach agreements (by whatever name), as opposed to reasonable B2E (business-to-employee) nonsolicitation agreements;
• Companies using noncompetes for employees who clearly should not have them; and
• Companies using truly unfair training repayment agreements (pejoratively called “TRAPs”), and similar agreements.

We shall see.

*Thank you to Max Perlman for alerting me to Chair Ferguson’s memo. 

Firm resources: 

We know how hard it is to keep up with the ever-changing laws and requirements around the country for how you can protect your trade secrets, customer goodwill, and the integrity of your workforce. To help, we have created the resources below (available for free). Each chart is regularly updated to reflect the latest developments. 

	50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF) (to be updated for the new exemptions in Illinois and Pennsylvania)50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF)
	Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable)
	Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF)
	“Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level
	Trade secret and other legitimate business interest protection plan strategy and checklist

We hope you find all of these resources useful. More will be coming.

And please note, we are grateful for all of the input we’ve received over the years. We welcome any suggestions for improvements that you may be willing to share.