On September 5, 2025, the Federal Trade Commission dismissed its appeals in Ryan, LLC v. FTC, (5th Cir.), and Properties of the Villages v. FTC, (11th Cir.), and accepted the nullification of the Biden administration’s Non-Compete Rule. At first glance, this means the Biden-era FTC Rule banning most non-competes is gone. However, employers still face significant nuance in state and federal law, and should review and revise their standard agreements before they’re challenged in Court.
Background
On April 23, 2024, the FTC issued a rule essentially banning all post-employment non-competition clauses. The FTC’s stated purpose for the rule was “to promote competition by banning non-competes nationwide, protecting the fundamental freedom of workers to change jobs, increasing innovation, and fostering new business formation.” In justifying the Rule, the FTC explained that:
“Non-compete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once non-competes are banned…The FTC’s final rule to ban non-competes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
If it had taken effect, the Biden-era Rule required the following:
- Most existing non-competes would no longer be enforceable.
- Existing non-competes for senior executives could remain in force, but employers would be banned from entering into or attempting to enforce any new non-competes, even for senior executives.
- Employers would be required to notify workers (other than senior executives) who were bound by an existing non-compete that they would not be enforcing any non-competes against them.
Litigation commenced almost immediately after the rule was announced but before it took effect. On August 20, 2024, a district court issued an order stopping the FTC from enforcing the rule. The Court held that the FTC lacked the authority to promulgate the rule and issued a nationwide injunction. The FTC appealed that decision. On September 5, the agency announced that it would dismiss its appeal.
The End of the Biden-era Non-Compete Rule
In announcing the end of the litigation to enforce the rule, FTC Chairman Andrew N. Ferguson issued a statement, in which he and Commissioner Melissa Holyoak stated that “The Rule’s illegality was patently obvious.” In their statement, the Commissioners explained that “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.”
What Does This Mean for Employers Today?
Although the Biden-era rule is no longer a concern, this does not mean that employers will be able to require employees to sign agreements that broadly limit their ability to work in their field. In their statement, the FTC Commissioners stated that “we will continue to enforce the antitrust laws aggressively against non-compete agreements. But we will leave the legislating to the people’s representatives in Congress and in the States.” The FTC invited the public to provide it with information “that helps us to better understand the scope, prevalence, and effects of non-compete agreements” so that the FTC can prioritize its resources for investigations and enforcement actions.
Shortly before announcing its decision to abandon the non-compete Rule litigation, the FTC brought an enforcement action against Gateway Services and its subsidiary Gateway US Holdings, Inc., a pet cremation company. The FTC alleged that Gateway imposed noncompete agreements on almost all of its employees, which typically prohibited them from working in the pet cremation service industry anywhere in the U.S. for one year after leaving Gateway. Under the FTC’s proposed consent order, Gateway would be required to immediately stop enforcing all existing noncompete agreements.
Key Takeaways:
- The Biden-era FTC Rule banning almost all non-competes is no longer at play.
- This does not mean that employers can require their employees to sign non-competes that broadly restrict their ability to work in their field.
- The FTC still plans to pursue enforcement actions to crack down on overbroad non-competes that restrict competition, limit job mobility, or prevent workers from switching to better-paying jobs.
- To ensure enforceability, employers should consider the following factors in implementing non-compete clauses:
- Should all employees be required to sign non-competes? The FTC has indicated that this approach will be too restrictive. Therefore, limit non-competes to just those employees who have access to confidential and proprietary information or who would be most valuable to a competitor.
- What are appropriate geographical limitations? If a non-compete restricts the employee from working in a much larger area than necessary to protect the employer’s business interests, it will likely be unenforceable.
- How long should an employee be restricted from competing? Consider how long any information the employee has about your company will still be valuable to a competitor. If the time period for the restriction is unreasonably long, it will likely be struck down.
Contact
To discuss further, contact KJK Labor & Employment attorneys Beth Spain (BRS@kjk.com) or Dave Campbell (JDC@kjk.com).