Our friends at Hoyer Law Group, PLLC discuss how the saga of the Federal Trade Commission’s attempted nationwide ban on noncompete agreements has reached its conclusion, and both employers and employees need to understand what it means going forward. An experienced business lawyer can help interpret how these developments affect existing agreements and guide you in drafting or enforcing noncompete provisions in compliance with current law.
What Happened
In April 2024, the FTC issued a final rule that would have banned virtually all noncompete clauses nationwide, with limited exceptions for senior executives. The rule was immediately challenged in federal court. In August 2024, a federal judge in Texas set it aside, ruling that the FTC lacked the statutory authority to issue such a sweeping regulation. By September 2025, the FTC voluntarily dismissed its final appeal, accepting the judicial determination that a blanket ban exceeded the agency’s rulemaking power.
The nationwide noncompete ban is dead. But the story does not end there, and business owners on both sides of the equation need to understand the landscape that has emerged in its wake.
The FTC Is Still Watching
Even as it abandoned the broad ban, the FTC signaled that it would continue to challenge noncompete agreements on a case-by-case basis under Section 5 of the FTC Act, which prohibits unfair methods of competition. On September 4, 2025, the same day the agency dismissed its appeal of the nationwide rule, the FTC brought an enforcement action against Gateway, the largest pet cremation services company in the United States, for requiring employees to sign twelve-month post-employment noncompete agreements. FTC Chairman Andrew Ferguson stated explicitly that noncompetes with an “anticompetitive purpose” will continue to face enforcement.
Employers cannot assume that any noncompete clause will survive scrutiny simply because the nationwide ban failed. Overly broad agreements, particularly those imposed on lower-wage workers or in industries where they serve no legitimate protectable interest, remain vulnerable to FTC challenge. The Gateway case is instructive: it involved employees who were not privy to trade secrets or confidential business strategies yet were still required to sign restrictive agreements that limited their ability to earn a living after leaving the company. That is precisely the kind of noncompete the FTC has indicated it will continue to pursue.
The State Law Patchwork
With no federal rule in place, noncompete enforceability is governed entirely by state law, and the differences are dramatic. California has long prohibited most noncompete agreements. Minnesota banned them effective July 2023. Colorado, Illinois, Maine, Maryland, New Hampshire, Oregon, Rhode Island, Virginia, and Washington have all enacted statutes limiting the use of noncompetes, particularly for lower-wage workers. Other states continue to enforce noncompetes when they are reasonable in scope, duration, and geographic reach, and when they protect a legitimate business interest, such as trade secrets, customer relationships, or specialized training. Some states have even recently broadened the enforceability of certain contracts under certain circumstances.
For businesses operating across state lines, this creates a genuinely complex compliance environment. A noncompete that is perfectly enforceable in one state may be void in another. Even the choice-of-law provision in the agreement may not save it, because some states have enacted statutes that void choice-of-law clauses designed to circumvent their noncompete restrictions. Employers need to ensure their restrictive covenant agreements are tailored to the jurisdictions where they will be applied, and they should work with counsel to understand how each relevant state treats enforceability issues.
Practical Guidance for Employers
The end of the FTC ban is not an invitation to impose aggressive noncompetes without thought. Employers should audit existing agreements to ensure they are reasonable and enforceable under applicable state law. Agreements should be narrowly tailored to protect specific, legitimate business interests, not used as a general tool to prevent competition. Adequate consideration should be provided at the time of signing, and the agreements should be regularly updated as the law evolves.
Employers should also consider whether alternative restrictive covenants might better serve their interests. Non-solicitation agreements, which prevent departing employees from soliciting the company’s clients or employees but do not restrict them from working for a competitor, are generally easier to enforce and less likely to draw regulatory scrutiny. Confidentiality agreements and intellectual property assignment provisions can protect trade secrets without imposing the broad employment restrictions that make noncompetes controversial. In many cases, a well-drafted combination of non-solicitation, confidentiality, and IP assignment provisions provides stronger and more reliable protection than a noncompete clause standing alone.
Practical Guidance for Employees
If you have been asked to sign a noncompete, or if a former employer is attempting to enforce one against you, the enforceability question depends heavily on the specific language of the agreement, the state whose law applies, and the circumstances of your employment. Many noncompetes that appear binding on their face are in fact unenforceable because they are overbroad, lack adequate consideration, or were never properly executed. Before you assume you are bound, have an experienced employment attorney review the agreement.
Even in states where noncompetes are generally enforceable, courts will scrutinize their reasonableness. A noncompete that prohibits you from working in your entire industry for two years, regardless of geographic area, is far more likely to be struck down than one that restricts you from soliciting your former employer’s specific clients for six months within a defined territory. Understanding the difference between an enforceable restriction and an unenforceable overreach can save you both anxiety and legal fees.
Whether you are an employer looking to protect your business or an employee trying to understand your obligations, the law surrounding noncompete agreements is nuanced and highly fact-specific. An experienced employment attorney can help you evaluate the enforceability of any agreement and develop a strategy that protects your interests in this evolving landscape.
This blog is for general informational purposes only and does not constitute legal advice. For advice specific to your situation, please consult a qualified attorney.