The U.S. Federal Trade Commission (FTC) has officially abandoned its attempt to impose a nationwide ban on most noncompete agreements.
On September 5, 2025, the FTC withdrew an appeal of a court ruling that struck down the agency’s 2024 rule that would have prohibited most new noncompete agreements and made many existing agreements unenforceable. A Texas federal court previously blocked the rule in August 2024, holding that the FTC lacked authority to issue such a sweeping regulation.
Because the FTC has abandoned its legal fight, the prospect of an impending nationwide ban is effectively gone. The enforceability of noncompete agreements will continue to be governed by a patchwork of state laws. Some states, such as California and Minnesota, broadly prohibit noncompete agreements, while others allow them under limited circumstances, often tied to employee salary thresholds or other restrictions.
Going forward, the FTC is now “taking bad actors to court” to challenge specific noncompete agreements, rather than trying to eliminate them altogether through administrative rulemaking. One recent lawsuit filed by the FTC challenged the enforceability against a company which required nearly all of its 1,800 employees to agree to a 12-month post-employment covenant to not compete. This included hourly workers, such as drivers and customer service representatives. The FTC asserts these agreements were provided without any individualized consideration to the employee’s role, or their access to sensitive information.
The FTC has also suggested it intends to prioritize challenging noncompete agreements in specific sectors. The agency has already sent warning letters to employers in the healthcare and staffing industries, urging them to review their agreements to ensure they are lawful and appropriately tailored to employees’ particular jobs. The FTC has also launched a public inquiry program, actively encouraging current and former employees to confidentially report employers they believe are using anticompetitive noncompete agreements. This information will be used to identify future enforcement targets.
Given the FTC’s clear enforcement agenda, employers who utilize noncompete agreements should take steps to mitigate risk. We recommend employers take the following steps:
1. Conduct a Comprehensive Audit. Review not only your noncompete agreements but also non-solicitation and nondisclosure agreements (NDAs). An overly broad NDA that effectively prevents an employee from working elsewhere could be treated as a functional noncompete by the FTC.
2. Move Away from a One-Size-Fits-All Approach. The days of inserting a noncompete into every offer letter are over. Work to adopt an individualized strategy, identifying specific roles and employees for whom a noncompete is necessary to protect legitimate business interests like trade secrets or significant investments in training.
3. Ensure Agreements are Narrowly Tailored. Every agreement should be reasonable in its duration, geographic scope, and the field of work it restricts. An agreement preventing an employee from working in an entire industry across the U.S. for two years is much more likely to attract FTC scrutiny than one limited to a specific role in a local market for six months.
4. Train Hiring Managers and Leadership. Ensure that managers understand the risks and are aligned with the company’s updated, lawful practices for using restrictive covenants. They should be prepared to articulate the specific business justification for any agreement they present to a candidate or employee.
At K|W|W, we’re tracking these fast-moving developments at both the federal and state levels. Please reach out to us if you have questions about the FTC’s enforcement priorities, need to review your current restrictive covenant agreements, or have concerns about how this new landscape impacts your business. K|W|W – Your Workforce. Our Priority.