FTC Pivots To Case-By-Case Enforcement On Noncompete Agreements

The FTC is now focusing on whether noncompete agreements are narrowly tailored to protect legitimate business interests, among other enforcement criteria.

In early 2026, the Federal Trade Commission shifted its strategy regarding noncompete agreements, moving away from a sweeping national ban toward a case-by-case enforcement approach.

This change follows a significant legal defeat in late 2024 and ongoing pressure from industry trade groups.

Following a January 2026 public workshop, the FTC clarified that it would no longer pursue a categorical national rule to ban noncompetes.

Instead, the agency will rely on targeted enforcement actions, summarized in a report from The National Law Review:

• Targeted Scrutiny: The FTC is focusing on agreements it deems overly broad or unjustified, particularly those involving lower-wage workers, employees in non-specialized roles, or interns.
• The “Reasonableness” Test: Commissioners have emphasized that companies must demonstrate a legitimate business interest — such as protecting trade secrets — to justify a noncompete. Agreements used solely to prevent competition are likely to be viewed as illegal restraints of trade.
• Industry-Specific Focus: The agency is paying close attention to the health care industry, where it believes noncompetes contribute to industry consolidation and “rollups,” as seen in ongoing cases like FTC v. U.S. Anesthesia Partners.
• Education Through Enforcement: By bringing specific cases, the FTC aims to educate the market on which types of agreements will trigger federal intervention, even without a formal rule in place.

Background: The Legal Roadblock

The pivot to case-by-case enforcement was prompted by a major court ruling in August 2024. In the case of Ryan LLC v. Federal Trade Commission, U.S. District Judge Ada Brown issued a nationwide injunction blocking the FTC’s proposed ban just days before it was set to take effect, ACA International previously reported.

• Statutory Authority: The court ruled that the FTC overstepped its bounds, finding the agency lacked congressional authority to issue substantive rules regarding “unfair methods of competition.”
• Arbitrary and Capricious: The judge labeled the proposed ban “arbitrary and capricious,” arguing it was a “one-size-fits-all” solution that failed to consider the benefits of noncompetes or to offer a reasonable explanation for such a broad prohibition.
• Voluntary Dismissal: Although the FTC initially appealed the decision, it reportedly moved to dismiss its appeal in late 2025, effectively conceding that the broad ban would not survive the current judicial climate.

Industry Opposition and Trade Group Impact

Trade groups, including ACA and the U.S. Chamber of Commerce, were instrumental in the pushback against the FTC.

ACA joined a coalition led by the U.S. Chamber of Commerce, arguing that a blanket ban would harm businesses’ ability to protect proprietary information and client relationships.

Groups like the National Retail Federation and various health care associations, such as the American Hospital Association, filed amicus briefs, claiming the FTC’s data on noncompetes was “cherry-picked” and did not reflect the economic realities of their specific industries.

Trade groups have celebrated the court’s decision; however, they continue to warn members that they must still comply with varying state laws, which are becoming increasingly restrictive even in the absence of a federal ban.

Takeaway for Employers

While the threat of a nationwide ban has receded, the FTC’s new case-by-case approach means the agency is still focused on enforcement.

According to The National Law Review, legal experts recommend that employers:

1. Narrow the Scope: Ensure agreements are limited in duration and geography.
2. Justify the Need: Document the specific “legitimate business interest” (e.g., specialized training or trade secrets) for each role that is subject to a noncompete.
3. Consider Alternatives: Use nonsolicitation or nondisclosure agreements where possible, as these are less likely to draw regulatory fire.