On September 5, 2025, the Federal Trade Commission (FTC) formally moved to dismiss its appeals in Ryan, LLC v. FTC (5th Cir.) and Properties of the Villages v. FTC (11th Cir.), effectively abandoning its 2024 Noncompete Clause Rule.
The original 2024 rule, championed by former Chair Lina Khan, sought to ban nearly all employer-employee noncompete agreements nationwide. Khan argued that such clauses “keep wages low, suppress new ideas, and rob the American economy of dynamism.” However, the rule faced immediate legal challenges and was ultimately enjoined by the courts.
In August 2024, courts in Texas and Florida issued findings against the rule. The Texas court vacated the rule entirely, finding the FTC had exceeded its authority. The Florida court issued a narrower, plaintiff-specific injunction, relying on the “major questions doctrine.” The FTC initially appealed both decisions, but after Andrew N. Ferguson was appointed Chair, the agency asked to pause the appeals while it reconsidered its position. With the recent motions to voluntarily dismiss both appeals, it appears the FTC is now fully abandoning the rule it announced just over a year ago.
A Shift in Strategy: From Rulemaking to Enforcement
Despite turning its back on the rule, the FTC has not retreated from the issue of noncompetes. On September 4, 2025, the agency filed an enforcement action against Gateway Services, Inc., alleging that its widespread use of one-year noncompete agreements violated Section 5 of the FTC Act. A proposed consent order would bar the company from enforcing most of these agreements and impose long-term compliance obligations, with limited exceptions for executives and business sales.
This enforcement action signals a strategic pivot: rather than pursuing a blanket ban, the FTC will now target what it deems the most egregious uses of noncompetes on a case-by-case basis, applying a “rule of reason” analysis.
That same day, the FTC issued a Request for Information seeking public input on the use and impact of noncompetes. The agency is gathering feedback to guide future enforcement and policy decisions. Comments are due by November 3, 2025.
What This Means for Employers
With efforts to establish a uniform federal standard now shelved, state laws and court decisions will continue to govern the enforceability of noncompete agreements. Employers must continue to navigate a patchwork of statutes and judicial interpretations, which vary widely across jurisdictions.
Key considerations include:
- Whether there are state statutes that void the use of noncompetes (entirely or for a specific profession) or contain notice requirements, wage thresholds and/or permissible (or impermissible) job classifications for the use of a noncompete;
- Whether the scope of the limited activity, the duration and/or geographic scope are reasonable and narrowly tailored as determined by applicable state statutes and judicial interpretations;
- Whether employment or continued employment is valid consideration for a noncompete;
- Whether a nonsolicitation and/or confidentiality provision will meet the legitimate business needs; and
- Whether courts in the applicable state will modify overly broad agreements.
Given the FTC’s renewed focus on enforcement and the continued complexity of state law, employers should review their noncompete practices with legal counsel, especially when operating across multiple states or industries under scrutiny.
