Federal Trade Commission Reverses Course on Rule Prohibiting Noncompete Agreements
Federal Trade Commission Reverses Course on Rule Prohibiting Noncompete Agreements
Kathryn Bennett, Law Clerk
On April 23, 2024, the Federal Trade Commission (“FTC”) under President Biden’s administration issued a rule banning noncompete agreements nationwide (“Rule”),[1] which was immediately challenged in court and eventually enjoined from taking effect. Recently, under the Trump administration the FTC moved to dismiss two appeals of the injunction pending in the Fifth and Eleventh Circuit Courts of Appeals, citing the change in administration as well as public comments made by FTC Chair Andrew Ferguson as grounds for an initial stay of the case. Now, the agency has officially walked back its support of the Rule.
Dismissal of the Appeals in Ryan, LLC and Properties of the Villages v. FTC Reverses Prior FTC Policy on Noncompetes
On September 5, 2025, the FTC filed a motion to dismiss its appeal of Ryan, LLC v. FTC, No. 24-10951 (5th Cir.) and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.) (collectively, the “Motions”), which will effectively prevent the Courts of Appeals from deciding whether the Rule went beyond the scope of the FTC’s authority, and will render the Rule unenforceable going forward.
The same day the Motions were filed, FTC Chair Ferguson released a statement echoing the 2024 decision of U.S. District Court Judge Ada Brown enjoining enforcement of the Rule, and denouncing the FTC for exceeding its authority under the Administrative Procedure Act. [2] Central to the decision was the fact that the Rule would extinguish millions of existing private employment contracts and actively displace “hundreds of existing laws across forty six States.”[3]
The FTC will now seek to promote labor competition and protect workers from illegal noncompete agreements on a case-by-case basis, rather than by sweeping regulation.[4] For example, on September 4, 2025 the FTC announced its recent settlement with Gateway Pet Memorial Services, the largest pet cremation business in the U.S., prohibiting it from executing, maintaining, or enforcing noncompete agreements, with limited exceptions.[5] The settlement represents the Commission’s change in approach to focus on individual enforcement actions rather than widely-applicable regulation. Additionally, Chairman Ferguson calls attention to the FTC’s September 4, 2025 Request for Information (“RFI”), “invit[ing] the public to provide the Commission with information that helps us to better understand the scope, prevalence, and effects of noncompete agreements.” [6]
Prior to 2022, Colorado held noncompete agreements void and unenforceable unless one of four exceptions applied, and such agreements still had to be reasonable in duration, geography, and scope. After Colorado’s Restrictive Employments Agreement Act (HB 22-1317) went into effect on August 10, 2022, noncompete agreements were void and unenforceable unless made with certain qualifying executive-level employees. Campbell Litigation previously addressed the potential effect of the Rule in Colorado;[7] however, the FTC’s about-face regarding noncompete agreements likely will have limited effect on Colorado noncompete laws.
Employer Considerations
Going forward, the FTC will look to its Joint Task Force to bring individual enforcement actions against unlawful noncompete agreements, rather than dedicate resources to regulatory promulgations.[8] Employers should expect an increase in investigations by the Commission and potential scrutiny of noncompete agreements that purport to bind relatively low-level workers, or which effectively prevent an employee’s entry into a specific industry. Campbell Litigation has extensive experience drafting and enforcing noncompete agreements; please feel free to reach out to our attorneys for assistance in the matter.
[1] FTC Final Rule Banning Noncompetes
[2] Statement of Chairman Andrew N. Ferguson Joined by Commissioner Melissa Holyoak Regarding Ryan, LLC v. FTC; August 20, 2024 Order in Ryan LLC v. Fed. Trade Comm., No. 3:24-CV-00986-E (Dist. Ct. N. Dist. Tex. Aug. 20, 2024). See also 5 U.S.C. §§ 701 et seq.
[3] Statement of Chairman Andrew N. Ferguson Joined by Commissioner Melissa Holyoak Regarding Ryan, LLC v. FTC at 1.
[4] Statement of Chairman Andrew N. Ferguson Joined by Commissioner Melissa Holyoak Regarding Ryan, LLC v. FTC.
[5] FTC Takes Action to Protect Workers from Noncompete Agreements | Federal Trade Commission.
[6] Request for Information Regarding Employer Noncompete Agreements
[7] FTC’s Final Rule Banning Most Noncompete Agreements Already Under Fire in Federal Court — The Rocky Mountain Employer.
[8] Statement of Chairman Andrew N. Ferguson Joined by Commissioner Melissa Holyoak Regarding Ryan, LLC v. FTC at 3.