Federal Noncompete Rule Is Dead But FTC Continues Enforcement

Author: Robert S. Teachout, Brightmine Legal Editor

September 11, 2025

The Federal Trade Commission (FTC) has officially dropped its appeal of a Texas district court's nationwide injunction halting a federal rule that would have banned nearly all noncompete agreements. But the FTC also signaled its intention to aggressively investigate and penalize employers that abuse such agreements and to gather information that may be used for further enforcement actions.

The FTC issued its final non-compete rule banning noncompetes nationwide in April 2024, saying that noncompetes "keep wages low, suppress new ideas and rob the American economy of dynamism."  The final rule was quickly challenged in court, and a district court in Texas blocked the FTC from enforcing the rule in August 2024, holding that the FTC lacked the statutory authority to issue it. The FTC appealed the ruling.

Following the appointment of Andrew Ferguson as FTC Chair, the agency requested a stay of the appeal while determining whether to continue to defend the rule. On September 5, 2025, the Commission voted 3-1 to dismiss the appeal. In announcing the decision, however, Ferguson reiterated the FTC's intention to pursue case-by-case enforcement against "bad actors" who abuse unfair noncompete agreements.

As a case in point, the FTC announced a consent order against Gateway Services, the nation's largest pet-cremation business, to stop enforcing noncompete agreements that restrict nearly 1,800 workers from working in the pet-cremation service industry anywhere in the U.S. for one year after leaving Gateway. In at least one instance, employees were required to sign the agreements shortly before a facility closed.

In addition, the FTC issued a request for information from employers about the scope, prevalence and effects of employer noncompete agreements, particularly in the healthcare industry. The information will be used to inform possible future enforcement actions. Members of the public have 60 days to submit comments at Regulations.gov, no later than November 3, 2025.