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September 23, 2025
On September 5, 2025, the Federal Trade Commission (FTC) announced that it voted 3-1 to accede to the vacatur of its Non-Compete Clause Rule (non-compete ban) and dismiss its appeals in cases pending in the Fifth and Eleventh Circuit Courts of Appeal.[1] Those dismissals end all pending litigation regarding the non-compete ban. But state law remains,[2] as do antitrust cases and cases against specific employers challenging specific non-competes.
In a written statement in which FTC Commissioner Melissa Holyoak joined, FTC Chairman Andrew N. Ferguson said that he and Holyoak believed that the non-compete ban was “unlawful six ways from Sunday.”
However, the FTC’s decision to withdraw support for the non-compete ban does not mean that non-competition restrictions now will go unregulated. Ferguson said in his statement that the FTC will do what Congress told it to do – “patrol[] our markets for specific anticompetitive conduct that hurts American consumers and workers, and tak[e] bad actors to court.”
Consistent with this statement, on September 4, 2025, the FTC sued Gateway Pet Memorial Services, alleging that it “knowingly wielded non-compete agreements to erect barriers in circumstances where it faced what it perceived to be tougher competition” in an effort to “curtail worker mobility and workers’ ability to negotiate better employment terms.” The key provisions of a proposed consent decree in the case provide context to the FTC’s enforcement efforts. The consent decree would (1) prohibit Gateway from entering into, maintaining, or enforcing non-competes, with limited exceptions[3]; (2) require Gateway to provide notice to employees that they no longer are subject to a non-compete; and (3) prohibit Gateway from restricting solicitation of Gateway customers unless the employee had direct contact or personally served the customer in the 12 months prior to the employee’s departure from Gateway.
Employers should take note of (3), above. Though customer non-solicitation provisions are a viable alternative to non-competes, the FTC has signaled here that it will not allow a company to substitute a non-compete with an arguably onerous non-solicitation provision.
The FTC also has invited the public to provide information to the FTC to help it understand the scope, prevalence, and effects of non-compete agreements. The FTC hopes that such information will help it prioritize resources for investigations and enforcement actions.
The public will have until November 3, 2025 to submit comments to the Request for Information. Once submitted, comments will be posted to Regulations.gov. Alternative submission guidelines exist for individuals wishing to submit confidential, non-public comments.
Furthermore, Chairman Ferguson promised that “in the coming days, firms in industries plagued by thickets of non-compete agreements will receive warning letters from me, urging them to consider abandoning those agreements as the [FTC] prepares investigations and enforcement actions.” And, consistent with that promise, on September 10, 2025, Chairman Ferguson sent letters to several large healthcare employers and staffing firms urging them to review their employment agreements, including any non-compete agreements or other restrictive covenants, to ensure that they are tailored appropriately to protect legitimate business interests and that they comply with the law.
Employer Takeaways
The federal non-compete ban may have been put to rest, but eyes on non-compete agreements are not closed. It is time for all employers to review their contracts closely to ensure compliance with the law. We can help.
This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice. Always consult an attorney with specific legal issues.
[1] Ryan, LLC v. FTC, No. 24-10951 (5th Cir.) and Properties of the Villages v. FTC, No. 24-13102 (11th Cir.).
[2] State laws across the nation vary, with some states banning all non-competes, some banning them in certain industries (like healthcare), some banning them against employees who earn lower than a threshold amount of wages, and some analyzing them case by case under reasonableness standards.
[3] The exceptions include the sale of a business, as well as non-competes with equity holders, their families, very senior managers, those with outside business relationships with the company, and those with unique access to competitively sensitive information.
