FTC’s Non-Compete Ban: Have We Reached A U-Turn or Just a Detour?

As Tom Petty once sang, “The waiting is the hardest part.” Employers waiting on the uncertain fate of the Federal Trade Commission’s non-compete rule can relate. With the initial sweeping ban announced in 2024 and legal challenges that followed, many businesses have been left wondering how to structure their workforce policies. Now, recent developments suggest that the FTC may be rethinking its approach, offering some clarity—though not yet certainty.

A New FTC Memo

The FTC has recently taken steps to address non-compete agreements, a long-debated issue in the job market. In a memo dated February 26, 2025, FTC Chairman Andrew N. Ferguson announced the creation of a Joint Labor Task Force to look into unfair labor practices, with non-compete agreements highlighted as a key focus. The memo states that non-compete agreements can impose unnecessary, burdensome restrictions on workers, limiting their ability to switch jobs and negotiate higher wages. The task force is charged with investigating these agreements, sharing research on their impact, and recommending regulatory or legislative actions to address abusive practices.

The FTC also plans to actively target employers that misuse non-compete agreements. This includes increased enforcement actions, penalties for companies that impose overly broad restrictions, and legal challenges against businesses that use non-competes to suppress wages or stifle competition. The agency aims to collaborate with state regulators to ensure compliance and take swift action against employers engaging in unfair labor practices. Additionally, the FTC will focus on public awareness by educating workers about their rights and encouraging them to report non-compete agreements that may violate fair competition laws. This move reinforces the FTC’s commitment to scrutinizing non-competes and addressing their negative impact on labor mobility and wages.

What’s Happening in the Courts?

Along with the memo, the FTC has asked the 5th and 11th Circuits to pause cases related to its non-compete rule for 120 days. The FTC’s new leadership, under Chairman Ferguson, has signaled a possible shift in approach, questioning whether defending the rule is still in the public’s best interest. While this suggests a possible change in policy, the rule has not been scrapped yet.

What Employers Need to Know

1. Possible Policy Change: The FTC’s request to pause legal challenges suggests it may be reconsidering its stance on banning non-competes. While changes are possible, nothing is final yet. Employers should stay updated and be ready to pivot.
2. Uncertainty Remains: Even if the FTC backs away from a nationwide ban, many states have been passing their own restrictions on non-compete agreements. Employers should keep an eye on local laws, especially in states like California and Minnesota, which have strong limits on non-competes.
3. Other Ways to Protect the Business: Whether or not the FTC rule is overturned, companies should think about other ways to protect legitimate business interests. Options include non-solicitation agreements, gardening leave, and non-disclosure agreements.
4. Clear Communication with Employees: The FTC is ramping up efforts to inform workers about their rights regarding non-compete agreements. Employers should be upfront about their policies to build trust and avoid potential disputes.

Conclusion

The FTC’s changing position on non-compete agreements presents both risks and opportunities for employers. Whatever happens with the proposed ban, the focus on fair hiring practices is here to stay. Employers should stay informed, ensure their policies comply with evolving laws, and maintain open communication with their workforce to navigate these changes effectively.