The FTC Non-Compete Ban Is Dead But Enforcement Actions Continue
September 9, 2025As discussed in prior posts (most recently here), the Federal Trade Commission's ("FTC") Biden-era proposal to ban all non-competes on a nationwide basis was enjoined by federal courts in Texas and Florida. With President Trump's election and the FTC under new leadership, it remained to be seen whether the FTC would continue to defend the ban on appeal or withdraw its support. The FTC signaled that it no longer intended to defend the ban when, on February 14, 2025, it withdrew prior guidance, and on March 7th, when it moved to stay its appeal of both the Texas and Florida injunctions.
Last week, on September 5th, as anticipated, the FTC formally withdrew its appeals, ending its efforts to ban employee non-competes through rulemaking. In a statement, recently appointed FTC Chair Andrew Ferguson said that the rule "would never survive judicial review" and that the FTC would instead pursue case-specific investigations and enforcement against what it finds are overly broad and unreasonable non-compete clauses, particularly those that that restrict low-wage workers. Such intent was demonstrated a day earlier when, on September 4, the FTC filed an enforcement action and proposed Consent Order against the largest pet cremation company in the United States, Gateway Services, Inc. (and its subsidiary, Gateway US Holdings, Inc.), which had a policy of requiring non-competes for all newly hired employees regardless of their position.
The demise of the FTC's non-compete ban also means that state lawmakers will continue to play a leading role with respect to regulating non-competes and other restrictive covenants. In fact, new bills in New York and New Jersey seek to sharply limit the use of non-competes.
- In New York, a new bill passed by the State Senate in June 2025 would prohibit non-competes for all employees (except for defined "highly compensated individuals") and ban non-competes entirely for health-related professionals. The bill—which would not be retroactive—would also limit any permitted non-competition agreement to one year, during which the employee must be compensated, and also contains an exception for the sale of a business. The bill remains under consideration in the State Assembly.
- In New Jersey, two bills introduced in the State Senate in May 2025 would ban almost all non-compete and "no-poach" agreements with retroactive effect. Similar to the New York proposal, the New Jersey non-compete bill makes an exception for certain existing agreements with defined "senior executives" (limited to a maximum of one year) and the sale of a business. Both bills remain in committee.
In light of the FTC's ongoing scrutiny of non-competes—especially those that are imposed indiscriminately across all levels of employees—employers, in consultation with counsel, should continue to craft their non-competition agreements so that they are reasonable in time, scope and geography, and monitor any changes in state law.
Links:
- A copy of the FTC Chair’s statement regarding the dismissal of the appeal and the vacatur or the Non-Compete Rule is here.
- A copy of the FTC Chair’s statement regarding the Consent Order with Gateway is here.
Our prior alert discussing the Rule is here: FTC Issues Long-Awaited Non-Compete Ban (herrick.com)
Our prior alert discussing the preliminary injunction ruling is here: Federal Judge Issues Limited Preliminary Injunction Against FTC Non-Compete Ban (herrick.com)
Our prior alert discussing the nationwide ban is here: Federal Judge Sets Aside FTC Non-Compete Ban on a Nationwide Basis | Employment Litigation | Herrick, Feinstein LLP
For more information on this issue or other employment matters, please contact:
Carol M. Goodman at +1 212 592 1465 or [email protected]
John H. Chun at +1 212 592 1546 or [email protected]
Ryan Feeney at +1 212 592 1582 or [email protected]
© 2025 Herrick, Feinstein LLP. This alert is provided by Herrick, Feinstein LLP to keep its clients and other interested parties informed of current legal developments that may affect or otherwise be of interest to them. The information is not intended as legal advice or legal opinion and should not be construed as such.