Question: Last year we heard that the Federal Trade Commission was going to ban covenants not to compete. It was a big deal at the time. Nothing has been said about this in months. Is this still going to happen? If so, when?
Answer: This was discussed twice last year in the MDA Journal. However, the FTC’s rule that would ban the entering into or enforcement of most employee noncompetition agreements remains held up. This ban was scheduled to take effect on Sept. 4, 2024, but never did due to several court cases challenging the authority of the FTC to ban covenants not to compete.
The legal arguments advanced by those involved in these court cases are complicated and have resulted in conflicting decisions by U. S. District Courts that are impossible to reconcile. As of this writing, these conflicting court decisions are on appeal in the Fifth and Eleventh Circuit Courts. The FTC in January of this year filed appellate briefs in these cases in support of its rule banning
covenants not to compete.
Since that time, changes have occurred at the FTC resulting from the incoming Trump administration. In March, President Trump fired two Democratic-appointed FTC commissioners, Rebecca Kelly Slaughter and Alvaro Bedoya. The firings are being challenged in court. Andrew Ferguson (a Republican appointed by President Biden) is the new FTC chair. Currently, the two commissioner positions created by the disputed firings of Slaughter and Bedoya are vacant. Whether and to what extent the three remaining FTC commissioners (Ferguson, Melissa Holyoak, and Mark Meador) will act on the rule banning covenants not to compete and other matters remains to be seen.
Generally, the Trump administration has stated that it is for deregulation. This would seem to make it likely that the FTC ban would be reversed or, if it survives the current court challenges, would not be enforced. There is support for this conclusion in the statements of Commissioners Ferguson and Holyoak. Commissioner Ferguson issued a dissenting statement when the ban was enacted, calling it “unlawful” and the “most extraordinary assertion of authority in the Commission’s history.” Ferguson’s dissenting statement was joined in by Commissioner Holyoak. Commissioner Holyoak issued her own dissenting statement, which was joined in by Commissioner Ferguson.
On March 7, 2025, the FTC filed motions in the Fifth and Eleventh Circuit Courts asking that the appeals be held in abeyance for 120 days. These motions refer to the opposition of the current FTC commissioners and are thought to signal that FTC action pulling back the ban on covenants not to compete is under consideration and imminent.
Clouding the water on this issue is the FTC’s Feb. 26, 2025, formation of a new Joint Labor Task Force. This suggests that the current FTC commissioners are not absolutely opposed to regulation addressing antitrust issues in the workplace. Commissioner Ferguson when directing the formation of this task force noted examples of “deceptive practices and unfair methods of competition” in the market for labor, including “non-solicitation or no-hire agreements and noncompete agreements.”
Unfortunately, no clear answer can be given on whether the FTC’s ban on covenants not to compete will ever become effective, or when. Uncertainty created by litigation and the change in the administration leaves us in the same place we were when the 2024 columns on this subject were published.
This article originally appeared in the July 2025 edition of the Journal of the Michigan Dental Association.
