FTC’s noncompete ban is dead, but its efforts to limit noncompetes survives

The nationwide FTC rule that would have categorically banned most noncompetes is effectively gone, but the agency has pivoted to case‑by‑case enforcement and policy initiatives that still pressure employers’ use of noncompetes and related restraints.

What happened to the FTC’s ban

• In April 2024, the FTC issued a final rule declaring most employer noncompete agreements an unfair method of competition under Section 5 and purporting to ban them nationwide.

• In August 2024, the Northern District of Texas (Ryan LLC v. FTC) set aside the Non‑Compete Clause Rule on a nationwide basis, holding that the FTC lacked statutory authority and that the rule was arbitrary and capricious.

• The FTC appealed but, under the Trump administration, moved in 2025 to dismiss its appeals and accede to the vacatur; those steps left the rule effectively dead and returned the legal landscape to pre‑rule status, with state law largely controlling enforceability.

How the FTC is still attacking noncompetes

Even without the rule, the FTC is using traditional Section 5 enforcement and policy tools to narrow noncompete use.

• Case‑by‑case enforcement: The FTC has brought matters alleging that certain blanket or broad noncompete provisions are unfair methods of competition, securing consent orders that force employers to stop using and enforcing those clauses (often with 10‑year compliance and notice obligations).

• Healthcare focus: In September 2025, FTC leadership sent warning letters to large health care employers and staffing firms stating that the agency is focusing Section 5 resources on “unlawful non‑competes, particularly in the healthcare sector,” and urging companies to discontinue unfair or anticompetitive noncompetes and notify affected workers.

• Public inquiry and record‑building: On September 4, 2025, the FTC launched a public inquiry to gather data on the “scope, prevalence, and effects” of employer noncompetes, explicitly to inform future enforcement actions and to highlight perceived harms including reduced worker mobility, suppressed wages, reduced new business formation, and higher consumer prices.

• Policing related restraints: The FTC has also targeted “no‑hire” and similar agreements, entering consent orders (for example, against Adamas Amenity Services LLC) that require employers to cease enforcing no‑hire clauses the agency views as suppressing competition for labor.

The broader landscape after the ban’s demise

• Federal rulemaking: Given decisions like Loper Bright limiting deference to agencies, and the Ryan ruling on FTC authority, commentators see nationwide restrictions via FTC or other administrative rulemaking as unlikely in the near term.

• Congressional path: There are legislative proposals that would largely ban noncompetes nationwide with limited exceptions (e.g., for sale‑of‑business scenarios and certain senior executives), enforced by the FTC, DOL, state AGs, and private actions, but passage is viewed as improbable in the current political environment.

• State activity: With the FTC rule vacated, state statutes and common law again drive most outcomes, and “dozens of states” have recently tightened or are tightening noncompete rules, creating a patchwork of bans, income‑threshold limits, and procedural requirements.

Practical implications for employers and workers

• Employers cannot rely on the federal rule but still face FTC scrutiny if they use broad, low‑wage, or coercive noncompetes or similar restraints, especially in health care and low‑to‑mid‑wage sectors.

• Compliance focus is shifting toward tailoring restrictive covenants (narrow scope, duration, and geography), substituting or emphasizing non‑disclosure and non‑solicitation restrictions, and reviewing no‑poach/no‑hire provisions for competition concerns.

• Risk assessments now must integrate state‑law limits, the FTC’s Section 5 posture, and parallel enforcement theories from other actors (e.g., DOJ antitrust scrutiny of labor market agreements, NLRB theories under the NLRA, and state AG activity), even though the sweeping FTC ban is gone.