What just happened? The Federal Trade Commission has abandoned its effort to defend a nationwide ban on employment noncompete agreements, bringing an end to one of the most high-profile regulatory initiatives of the Biden era. Late Friday, the agency voted 3-1 to withdraw its appeal of a federal court ruling that blocked the ban, a move that effectively clears the path for noncompete contracts to remain in use across much of the US.
The decision came just ahead of a court-imposed deadline. The Fifth Circuit Court of Appeals had issued repeated delays at the request of the Trump administration, whose new FTC leadership signaled reluctance to continue defending the ban. By Friday, the commission confirmed that it would not proceed.
"The rule's illegality was patently obvious," FTC Chair Andrew Ferguson wrote in a joint statement with Commissioner Melissa Holyoak. Ferguson argued the measure unlawfully overrode state-level laws governing contracts, saying it "preempted the laws of all fifty States, and actively displaced hundreds of existing laws across forty-six States."
The lone dissent came from Commissioner Rebecca Kelly Slaughter, the only Democrat now on the panel, who returned to her post this past week following a court ruling that reinstated her after Trump's earlier removal attempt.
The FTC first finalized its ban on noncompetes in April 2024 under then-Chair Lina Khan. The rule would have invalidated most existing agreements and prohibited new ones – with limited exceptions. At the time, the commission estimated that roughly 30 million Americans – about one in five workers – were bound by such restrictions, ranging from hourly employees to corporate executives.
Proponents hailed the rule as a major step toward boosting worker mobility and earnings. Khan argued that eliminating noncompetes could increase US wages by as much as $300 billion annually and spur the creation of thousands of new businesses. But those projections were never tested. Ryan LLC, a Dallas-based tax services firm, quickly challenged the rule, backed by the US Chamber of Commerce. A federal judge in Texas sided with them, concluding the FTC had exceeded its authority. The court halted the nationwide implementation of the ban before it took effect.
Opponents of the rule argued from the outset that the FTC lacked authority to impose a blanket ban on employment practices. "By far the most extraordinary assertion of authority in the Commission's history," Ferguson wrote in a 2024 dissent, warning it violated constitutional limits.
Yet Ferguson has also acknowledged that noncompete clauses can be harmful. "They can be, and sometimes are, abused to the effect of severely inhibiting workers' ability to make a living," he wrote in Friday's statement. As chair, he has signaled a shift toward targeted enforcement, focusing on agreements deemed anticompetitive under the Sherman Act rather than pursuing a universal ban.
Last week, the agency illustrated this approach by ordering the nation's largest pet cremation company to cease enforcing noncompete agreements with nearly 1,800 employees. Additionally, the FTC is asking the public to submit information about how noncompete agreements are used, which could inform future enforcement actions.
Critics of the commission's reversal argue that piecemeal enforcement cannot match the impact of a nationwide rule. "It does nothing to help the person working at the hair salon in Minnesota, or the engineer in Florida, or the fast food worker in Washington," Slaughter told NPR. "Those people deserve protection, too."
Business groups maintain that such restrictions protect legitimate corporate interests. Ryan LLC, the plaintiff in the original lawsuit, argued that the ban would allow employees to depart for competitors while taking sensitive knowledge with them. The Chamber of Commerce has warned that removing noncompetes could disrupt labor markets and weaken productivity.
For now, the commission is moving in a different direction. The nationwide rule is set to be vacated, and scrutiny of noncompete agreements will proceed on a case-by-case basis. What was once billed as a sweeping overhaul of the employment landscape has given way to more incremental action.
