FTC Overhauls Enforcement and Oversight of Non-Compete Agreements

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Quick Look

  • The FTC’s Joint Labor Task Force is now active, launching its first enforcement action targeting non-compete agreements used broadly across all employee levels.
  • The FTC will assess non-competes using a reasonableness standard, balancing employer interests against employee hardship and public harm.
  • The FTC has dropped its legal defense of the Biden-era rule banning non-competes, opting instead for case-by-case enforcement.
  • Employers are invited to submit information about their competitors’ use of non-competes, with a particular focus on healthcare industry practices.

Discussion

First Enforcement Action of the Joint Labor Task Force

 

In February 2025, the FTC’s Chairman directed the formation of a Joint Labor Task Force, with an aim of “rooting out and prosecuting deceptive, unfair, and anticompetitive labor-market practices that harm American workers.” Following formation of the Task Force, the FTC has taken its first enforcement action targeting a company that imposed non-competes on all new hires, regardless of role. As a result of the enforcement action, employers should note that blanket non-compete policies may trigger federal scrutiny. The resulting consent order requires the company to notify employees that non-competes are void and limits non-solicitation clauses to customers the employee directly served in the past 12 months.

 

New Legal Standard for Non-compete Evaluation

 

In a separate statement, issued on September 4, 2025, the FTC announced that they will use a fact-specific approach similar to the common-law “rule of reason,” when evaluating whether a non-compete is narrowly tailored to protect legitimate business interests (with limited exceptions). Among the factors relevant to the FTC’s finding of unlawfulness here included:

  • The size of the company, both in terms of employees and business;
  • Whether the company required non-competes of all employees or a subset of employees;
  • The behavioral, temporal, and geographic scope of the non-compete provisions; and
  • Whether the employees with non-competes had job duties that might justify non-compete restrictions.

 

FTC Drops Biden-Era Non-compete Ban

 

Employers will recall that the Biden-era FTC proposes a near complete ban on non-compete agreements in April 2024. This proposed rule has been subject to significant ongoing litigation and the FTC was required to update the appellate court on their intentions to continue to defend the ban by September 8. Just before their deadline, the FTC announced that they will stop pursuing the action and filed paperwork to dismiss their legal actions. Rather than defending the rule, the FTC has indicated that they will address non-compete agreements “through enforcement actions against companies that misuse them in violation of the law.”

 

Information Requested from the Public on Use of Non-compete Agreements

 

On September 4, 2025, the FTC published a public request for information (RFI) asking the public to provide information on the use and enforcement of employee non-compete agreements. Employers are encouraged to participate in the FTC’s public inquiry, especially if they’ve experienced hiring challenges due to competitors’ non-compete practices. This is an opportunity to influence future enforcement and policy direction.

 

The public has 60 days to respond to the FTC’s RFI, which asks a number of questions, including which employers are using non-compete agreements, what are the terms of those agreements, and how are they being enforced. The FTC also offers a confidential submission option to protect the confidentiality of many of these types of agreements.

 

Action Items

  1. Review non-compete and non-solicitation agreements with legal counsel.
  2. Continue to monitor enforcement efforts from the FTC.

 

Disclaimer: This document is designed to provide general information and guidance concerning employment-related issues. It is presented with the understanding that ManagEase is not engaged in rendering any legal opinions. If a legal opinion is needed, please contact the services of your own legal adviser. © 2025 ManagEase