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The Rising Tide of Noncompete Regulation: Navigating the FTC’s Shift After the Vote
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The Rising Tide of Noncompete Regulation: Navigating the FTC’s Shift After the Vote

October 1, 2025 Employment Law

Reading Time: 4 minutes


A Course Correction in Noncompete Policy

In April 2024, the Federal Trade Commission (FTC) made national headlines when it voted to adopt a rule banning most noncompete agreements nationwide. The move sought to reshape employer-employee relationships in a way that would expand worker mobility and challenge traditional business protections.

By September 2025, however, that sweeping ambition had changed course. The FTC formally acceded to vacatur of its Non-Compete Clause Rule, abandoning its appeal of federal court rulings that had blocked enforcement. What began as an ambitious nationwide ban has now shifted into a more targeted approach, with the FTC signaling that its focus will move toward case-by-case enforcement and continued scrutiny of employer practices.

The Rule That Was

The FTC’s original noncompete rule was intended to be transformative. It would have prohibited most new noncompete agreements, invalidated many existing ones, and required employers to notify workers that their restrictions were no longer enforceable. Senior executives were carved out of certain aspects, but the scope of the rule was still unprecedented. The FTC argued that eliminating these covenants would improve wages, increase entrepreneurship, and promote competition in labor markets.

For employers, this rule represented a major shift. Longstanding practices of protecting trade secrets, client lists, and investments in training through noncompete provisions would have been largely curtailed. Businesses across industries immediately began reviewing how to adjust their contracts and policies in anticipation of a post-noncompete landscape.

Almost as soon as the rule was published, lawsuits were filed challenging the FTC’s authority. Federal courts questioned whether the Commission had the power to issue such a sweeping regulation. In August 2024, the U.S. District Court for the Northern District of Texas, in Ryan, LLC v. Federal Trade Commission, struck down the rule, holding that the FTC had exceeded its statutory authority. Other courts weighed in with varying decisions, creating a patchwork of uncertainty.

Rather than press forward through lengthy appeals, the FTC chose to step back. In September 2025, the Commission announced that it would abandon its efforts to enforce the rule, effectively leaving the ban on the shelf. While the bold national approach has ended, the agency has made clear that it is not abandoning the issue altogether.

What Comes Next

With the nationwide ban vacated, employers are left with a more familiar but still evolving framework. Noncompete enforceability now primarily depends on state law, which already varies significantly across jurisdictions. At the same time, the FTC has indicated that it will continue to review noncompete practices and pursue actions where clauses are overly broad or harmful to competition.

This means businesses face dual pressures. On one hand, state courts will continue to apply reasonableness tests to restrictive covenants. On the other, the FTC may now take a more targeted approach, pursuing enforcement against agreements it believes go too far. Employers who assume the issue has gone away risk finding themselves the subject of a federal investigation or litigation.

Guidance for Employers

In light of these developments, employers should take proactive steps to minimize risk. Reviewing existing noncompete clauses to ensure they are narrowly tailored is a critical first step. Clauses that restrict only what is necessary to protect trade secrets, confidential information, or established client relationships are more likely to withstand scrutiny. Employers should also consider whether other tools, such as nondisclosure or non-solicitation agreements, can achieve the same goals with less risk.

Equally important is keeping track of developments in the states where your business operates. Many states have already passed laws restricting noncompetes for certain categories of workers, such as low-wage employees. More changes are likely in the coming years.

Consult Jimerson Birr

The FTC’s retreat from its nationwide ban does not mean the issue is over. Instead, it marks the beginning of a new phase where regulatory oversight and litigation will shape the boundaries of what employers can and cannot do.

Jimerson Birr has deep experience advising businesses on employment contracts, restrictive covenants, and regulatory compliance. Our attorneys can help review existing agreements, develop alternative strategies, and ensure your business is protected without running afoul of evolving rules.

If your organization uses or is considering noncompete agreements, now is the time to act. Contact Jimerson Birr today to schedule a consultation and gain clarity on how to safeguard your business interests in this changing environment.

Source: Federal Trade Commission Files to Accede to Vacatur of Non-Compete Clause Rule | Federal Trade Commission

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