The reports of the Noncompete Rule’s death have not been exaggerated. As predicted, the FTC has finally withdrawn its two appeals of the adverse decisions.
The saga is over.
The Noncompete Rule is dead.
But, as detailed below, the FTC is now focusing on employers that it believes are using abusive noncompetes and other restrictive covenants. It is inviting employees to report alleged abuses — reports that will almost certainly be significantly over-inclusive, but will likely identify at least some real abuses. Companies that the FTC believes are abusing noncompetes will receive a notice and then could face enforcement actions. Obviously, the FTC’s resources are limited — but they are not insignificant.
Accordingly, employers should take this opportunity to review their restrictive covenants and related policies and practices.
What happened?
Late yesterday afternoon, the FTC issued the following press release:
Today the Federal Trade Commission took steps to dismiss its appeals in Ryan, LLC v. FTC, No. 24-10951 (5th Cir.), and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.), and to accede to the vacatur of the Non-Compete Clause Rule.
At the time the Biden FTC issued the Rule, current Chairman Andrew N. Ferguson and Commissioner Melissa Holyok dissented on the grounds that the FTC lacked the statutory authority to issue the Rule. The district court found that the FTC does lack the authority, and prohibited enforcement of the Rule.
The Commission voted 3-1 to dismiss the appeal and accede to the vacatur. Chairman Andrew N. Ferguson issued a statement joined by Commissioner Melissa Holyoak. Commissioner Mark R. Meador issued a concurring statement. Commissioner Rebecca Slaughter issued a dissenting statement.
The Federal Trade Commission works to promote competition, and protect and educate consumers. The FTC will never demand money, make threats, tell you to transfer money, or promise you a prize. You can learn more about consumer topics and report scams, fraud, and bad business practices online at ReportFraud.ftc.gov. Follow the FTC on social media, read our blogs and subscribe to press releases for the latest FTC news and resources.
Each of the Commissioners’ issued a statement that is worth a read.
Statement of Chair Ferguson and Commissioner Holyak
Political jabs aside, the statement of Chair Ferguson and Commissioner Holyoak adopts many of the substantive points about noncompetes and their effect that I and 100 other lawyers made to the FTC when it was considering the rule. Here is their statement in full:
Today, the Federal Trade Commission withdrew its notice of appeal in Ryan, LLC v. FTC, No. 24-10951 (5th Cir. 2025). In doing so, it acceded to the vacatur of the Commission’s Non-Compete Clause Rule. That Rule purported to ban almost all contracts in which an employee agreed not to work for his or her employer’s competitor after his or her employment. It did so prospectively and retrospectively, extinguishing thirty million existing private contracts. It preempted the laws of all fifty States, and actively displaced hundreds of existing laws across forty-six States. It redistributed nearly a half trillion dollars of wealth within the general economy. And it purported to render categorically unlawful a species of contract that has been lawful since the eighteenth century by reimagining a single clause tucked away in an ancillary provision of a century-old statute.
Little more need be said about the legal viability of the Rule. The Rule’s illegality was patently obvious. Commissioner Holyoak and I warned our Democrat colleagues at great length that the Rule was unlawful six ways from Sunday; that the Rule would never survive judicial review; and that the resources sunk into the Rule’s promulgation and defense would be wasted. We were ignored. The allure of press junkets and the praise of congressional Democrats was irresistible. And, as predicted, the courts swiftly invalidated the Rule.
Let us be clear: plaudits from the liberal media and other Democrat partisans are all this Rule generated. Perhaps that was the point. The Rule did not protect a single American worker, nor did it bring any relief to a single worker who is stuck in a job because of a noncompete agreement. And that is a shame. As I have said, noncompete agreements can be pernicious. They can be, and sometimes are, abused to the effect of severely inhibiting workers’ ability to make a living. That is why English law categorically prohibited them until the eighteenth century. That is why all fifty States regulate them extensively, and why some outright ban them. And that is why Congress, through the FTC Act and the Sherman Act, gave us the authority to step in when they are onerous enough to become unlawful. The Commission should have been doing everything it could to find unlawful noncompete agreements and eliminate them.
The Biden Commission could have deployed the thousands of taxpayer-funded manhours spent on the Rule’s promulgation and defense on law enforcement. It could have brought cases that would have protected American workers from the effects of their unlawful noncompete agreements. That is what the Trump-Vance Commission is doing. But like so many of the previous administration’s other failed ventures, the Democrats were satisfied with hollow rhetoric in press releases. In four years, the Biden Commission brought just four noncompete cases. It settled three the day before issuing the proposed noncompete rule, and used those settlements as evidence that it had the power to promulgate the Rule. For all of the Biden Administration’s bluster about noncompete agreements, that is all they had to show for it—four settlements over a three month period, and a failed rule. One cannot help but conclude that the purpose of the Biden Commission’s policy was not to help American workers, but rather affirm the former Chairwoman’s faculty-lounge musings that impress no one but left-wing academics and cable-news pundits. The tendency to engage in such wasteful exercises is just one of many reasons why the last administration was resoundingly voted out of office.
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.
Indeed, the Trump-Vance Commission has already moved aggressively against unlawful noncompete agreements. Just yesterday, the Commission blocked a large national business from entering into, maintaining, or enforcing noncompete agreements, with limited exceptions. The complaint alleges that Gateway Pet Memorial Services “knowingly wielded noncompete agreements to erect barriers in circumstances where it faced what it perceived to be tougher competition” in an effort to “curtail worker mobility and workers’ ability to negotiate better employment terms.” The FTC has invited the public to provide the Commission with information that helps us to better understand the scope, prevalence, and effects of noncompete agreements, and will help the Commission prioritize resources for investigations and enforcement actions. And in the coming days, firms in industries plagued by thickets of noncompete agreements will receive warning letters from me, urging them to consider abandoning those agreements as the Commission prepares investigations and enforcement actions.
As the above indicates, we will continue to enforce the antitrust laws aggressively against noncompete agreements. But we will leave the legislating to the people’s representatives in Congress and in the States.
(Footnotes omitted; emphasis added to highlight key points and takeaways.)
Commissioner Meador’s Statement
Commissioner Meador issued a concurrence that is informative insofar as he lays the groundwork for the likely nature of the FTC’s future enforcement actions. Specifically, his statement includes the following:
Noncompete agreements, which bar employees from joining a competitor or starting a competing business after leaving an employer, present opposing economic considerations that require careful analysis. Given this complexity, it is my view that such agreements, while they can raise serious competitive concerns, are neither uniformly benign nor invariably harmful. For this reason, a more balanced enforcement approach than that contemplated by the noncompete rule is warranted.
On the one hand, noncompete agreements can create barriers to entry, restrict worker mobility, and suppress wages in ways that harm competition and workers. These concerns have become heightened in recent decades as noncompete clauses have become more and more common in employment agreements. Given this trend, I fully support rigorous enforcement against noncompete agreements under both Sections 1 and 2 of the Sherman Act and Section 5 of the FTC Act when the Commission has reason to believe the law is violated.
At the same time, noncompete agreements can protect legitimate investments in training, encourage internal collaboration, and safeguard proprietary and confidential information. Particularly for medium and small businesses, these provisions can allow companies to invest in developing a workforce and protect know-how. Thus, while focus on noncompete agreements as an unfair method of competition is long overdue, the approach the Commission takes should not make it harder for Americans to start and run a business.
Accordingly, rather than taking a categorical approach, this statement outlines the general analytical framework that I believe the Commission should apply when evaluating noncompete agreements between employers and employees. This statement identifies many of the pro- competitive benefits and adverse effects associated with such restrictions, as well as the contextual factors that impact how such provisions should be analyzed. It also provides my view on the legal approach that should be taken when challenging such provisions under Sections 1 and 2 of the Sherman Act and Section 5 of FTC Act.
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The competitive character of a noncompete depends on the employment context and circumstances under which the noncompete arises. For example:
- Employee wage and skill level: Noncompetes tend to be less justified when applied to low-wage workers, as such individuals are less likely to receive employee-specific training and typically have limited access to confidential information. Noncompete provisions in this context are more likely to operate in a manner that restricts worker mobility without protecting legitimate business interests. By contrast, noncompetes for highly-skilled or specialized employees may be more readily justified where employers make substantial investments in training, provide access to proprietary methods, or share confidential business information. However, even in these contexts, the restraints must be carefully tailored to legitimate business needs, including limitation to a reasonable scope and duration.
- Deployment in a distribution network: Noncompetes that are deployed across a distribution network may warrant greater scrutiny because it may involve horizontal elements. For example, noncompetes in the franchise context can raise concerns when such provisions are adopted at the behest of franchisees or operate as a facilitation device that discourages independent operators from competing for employees.
- Independent contractors: Agreements with independent contractors require analysis that considers whether the relationship functions more like traditional employment relationship or an independent supply arrangement, as the latter may more closely resemble exclusive dealing (which raises competitive considerations separate and apart from traditional noncompetes). The competitive analysis should therefore account for whether the contractor operates under exclusive terms or whether the contractor receives dedicated resources or training that could create legitimate free-riding concerns.
. . . Legal Framework
In evaluating noncompetes, the Commission should consider the following non- exhaustive list of factors:
- Likelihood of Free Riding: The analysis should first determine whether genuine free- riding concerns exist, such as those presented by employer-specific investments in training, access to confidential know-how, and sharing of proprietary information.
- Availability of Less Restrictive Alternative: Even where free-riding concerns exist, an employer must demonstrate that the noncompete is reasonably necessary to prevent harm from materializing and, in turn, that narrower restraints (e.g., non-disclosure agreements, customer non-solicitation clauses, asset-use restrictions, intellectual property protections, etc.) are insufficient to address the potential harm to the employer’s business interests.
- Scope and Duration Analysis: The restraint should be no broader in geographic scope, duration, and field of employment than necessary to protect legitimate interests. While contextual analysis (as outlined above) is typically required, some general “rules of thumb” may be appropriate. For example, the following scenarios may be more likely to present competitive concerns:
- Durations exceeding one to two years.
- A geographic scope that exceeds the boundaries of the employer’s current operations or the locations where the employee performed their regular duties.
- Restrictions on an employee’s ability to pursue work in industries or professions that are unrelated or only tangential to the company’s core business or the employee’s specific role.
- Market Power: Noncompetes imposed by firms with market power raise heightened competitive concerns. Nonetheless, as stated above, a showing of market power is not required to challenge a noncompete under Section 5.
- Evidence of Economic Effects: In addition to demonstrating that a noncompete may have anticompetitive or adverse economic effects (such as evidence the noncompete operates as an entry barrier or materially reduces labor mobility), the Commission should also consider additional contextual economic evidence, including whether there is widespread use of noncompetes across an industry, whether the noncompete implicates a horizontal agreement among competitors (such as in the context of a no-poach arrangement or when deployed across a distribution network), the skill and wage levels of the employees implicated, and whether the individual is an independent contractor or the functional equivalent of an employee. In addition, an employer should be provided an opportunity to demonstrate that any potential adverse competitive or economic effects are substantially outweighed by reasonably certain procompetitive benefits that accrue to workers and consumers.
. . . Conclusion
Noncompetes should not be judged under a blanket rule of legality or illegality. A contextual framework—grounded in traditional antitrust principles and supplemented by the FTC’s Section 5 authority—offers a more workable approach. This approach would be more akin to treating noncompetes as being subject to a “rebuttable presumption” of illegality, with the employer bearing the burden to demonstrate that the noncompete is reasonably necessary to achieve legitimate business interests and narrowly tailored toward that end.
This proposed framework balances the procompetitive justifications of noncompetes against their anticompetitive and adverse economic potential while aiming to both address administrability concerns and provide future guidance to the business community. By clarifying the legal inquiry and focusing on context, necessity, and proportionality, the Commission can continue to protect legitimate business investments while ensuring that noncompetes do not unduly restrict competition or worker mobility.
Commissioner Slaughter’s Statement
Not surprisingly, recently reinstated Commissioner Slaughter held tight to the misinformation relied upon by the Khan-led FTC and issued a dissent.
Despite claiming to support American workers, President Trump has, at every turn, thrown workers under the bus to ingratiate himself with corporations and their billionaire CEOs. Another example comes today as the Trump-Vance FTC decides to throw in the towel on years of work by the agency to protect workers from draconian noncompete agreements that lower wages, trap workers in abusive jobs, and even inhibit new business formation. The FTC received 26,000 comments on the rulemaking to ban noncompetes proposed under Chair Khan; 25,000 of those comments supported a categorical ban. Corporations sued to overturn the rule, and different courts came to different conclusions, but the FTC was still fighting to protect workers.
Today, sadly, the FTC’s Republican majority decided to throw in the towel. In place of a rule to protect nearly all American workers from abusive noncompetes, the majority offers a one-off settlement and a request for information (as though the record of tens of thousands of comments does not exist). Perhaps the agency is hoping that, by dismissing the Commission’s appeals and refusing to continue defending the rule in court, no one will notice that the FTC is choosing the side of controlling bosses over American workers. But every worker trapped by a noncompete who would be liberated by this rule—and that is millions of workers in America—knows the truth.
I dissent, and strongly object, to the dismissal of the appeals and acceding to the decision of the Northern District of Texas. The most important problem here is the substance—the duly promulgated rule, and the millions of American workers and businesses it protects, deserve vigorous defense in court. I’ve written at length about the importance of the noncompete rule, so I will not rehash those arguments here. Suffice it to say that the record in the FTC’s own rulemaking proceeding made clear that noncompetes not only present barriers to worker mobility but also suppress wages, prevent new business formation, and slow innovation. They even deprive consumers of the better products and better prices we expect from competitive markets. And if the workers in your field have noncompetes—even if you don’t—the evidence shows your wages get suppressed too, even for workers who are not subject to a noncompete themselves.
But process is also a problem: If the agency insists on unwinding this key worker protection, it must follow the legal process of notice and comment set forth by the Administrative Procedure Act. The law does not permit the agency to void this popular rule under cover of darkness by simply withdrawing from litigations. The law requires that we hear from the American people. In absence of that legally required process, the action the Commission takes today should not hamper the agency in the future.
The last paragraph is somewhat surprising: Commissioner Slaughter appears to advocate that the FTC should have continued to push forward with doomed appeals. That seemed like a misguided approach even under the Khan-led Commission. The Noncompete Rule’s throw-the-baby-out-with-the-bathwater approach was a significant overreach. Had the original rule adopted a more balanced approach (like the framework Commissioner Meador outlines), it likely would have met far less resistance, leaving the FTC’s authority as the only real legal issue.
Takeaways
There are a few obvious takeaways: The FTC will be bringing enforcement actions; disgruntled employees will be identifying companies that abuse (or even just use) noncompetes to the FTC; and the FTC will pursue companies abusing noncompetes, such as using them for low- (and, potentially, mid-) wage workers.
Accordingly, given these developments, if you have not already done so, now is the time to review your noncompetes, other restrictive covenants, and policies and procedures.
Here are some alternative tools to consider:
- Nondisclosure / Confidentiality Agreements: Every employee with access to confidential information should have a nondisclosure / confidentiality agreement. These agreements are routinely enforced, but need to avoid overreaching to protect information that is not confidential. Courts have cracked down on overly broad confidentiality agreements.
- Pay-to-Not-Play Agreements (a/k/a Stand-Down Incentive Agreements — I’m still workshopping the name): These agreements provide incentives to employees who would otherwise be appropriate candidates for a noncompete. The employer and employee agree that the employee is free to compete post-employment, but if the employee chooses not to, the company will pay them an agreed-upon amount during the period the employee refrains from competing. It is the inverse of a forfeiture-for-competition agreement, insofar as the employee is not forfeiting payments to which they are entitled. Rather, they have an opportunity to earn extra money — even while working for another company consistent with the terms of the agreement. I can see arguments for why these agreements would not be enforceable, but in reality, that should never be an issue, as there is little incentive to challenge them.
- Garden leave clauses (a/k/a Notice Requirements — i.e., a “true” garden leave clauses): Another type of agreement that is increasingly in vogue following the issuance of the FTC’s failed Noncompete Rule is an agreement requiring advance notice of resignation. This is not a paid-for-noncompete, where the employee leaves and is paid during the restricted period of a noncompete. This is more like the traditional garden leave from England, where the employee remains employed, though typically put on administrative leave, and retains the benefits (remaining on the payroll) and burdens (fiduciary duties) of employment. The FTC specifically disavowed application of the Noncompete Rule to true garden leave clauses.
- Training Repayment Agreements: For employees where there is a true, documentable investment in their training, use training repayment agreements (pejoratively called TRAPs) can be a way to offset the cost of their departure. Of course, the repayment obligations should typically be reduced as the employer recovers the investment and, more importantly, the agreements need to comply with the developing law. Colorado’s 2024 law, for example, imposed limitations on these agreements, and you can expect the FTC to scrutinize them as well. But a fair training repayment agreement that reasonably requires reimbursement is an option to at least evaluate in the right circumstances.
- No-announcement Covenants and Policies: At the time an employee departs, some states allow them to announce their departure, while other states have no such rule. Consider whether a no-announcement agreement or policy makes sense.
- Trade Secret Protection Programs: No matter what agreements and policies your company relies on, a proper trade secret protection program — including, for example, pre-employment trade secret trainings — is an important way to limit the infiltration and exfiltration of trade secrets and other confidential information.
Whatever approach you take should involve a holistic review of what makes sense in your particular industry and for your company. And, of course, it needs to comply with applicable state and federal law — both of which are constantly evolving.
With the FTC now pursuing the overuse of noncompetes and other restrictive covenants through case‑by‑case adjudication, there will be many judgment calls to make. The tools identified above should help, but some — like the Pay‑to‑Not‑Play agreements and no‑announcement covenants — are novel and could face challenges. So, employers need to thoughtfully evaluate and implement a plan, considering which tools to use and how to stack their protections.
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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.