Federal Trade Commission vacates noncompete rule

The FTC announced earlier last month that it voted 3-1 to vacate the 2024 final rule banning most post-employment noncompete agreements. With this vote, the FTC formally ended the initiative from the Biden Administration to eliminate these types of contracts across the US.

Noncompete agreements generally restrict employees who leave a job from working in that field or for a competitor of the company for a specific time frame as well as in a certain geographic area, according to the American Veterinary Medical Association (AVMA).¹ In April 2024, the FTC announced its final rule to ban noncompete nationwide and estimated that new business formation would increase by 2.7%, higher wages for workers, and lower health care costs.² Now, most of the commissioners support prosecuting anti-compete agreements and issued a request for information to better understand the prevalence, scope, and effects of noncompete agreements.

When the FTC issued its noncompete rule, it would have prohibited almost all noncompetes prospectively and retroactively, which impacted an estimated 30 million workers in the United States. The rule then created legal challenges from employer groups. In August 2024, US District Court for the Northern District of Texas stated that the rule was "arbitrary" and "capricious" and then vacated the rule. The FTC appealed, but due to the recent vote by the commission, the FTC filed motions to withdraw the appeals that it filed.

FTC also dismissed its pending appeals in the Ryan LLC v. FTC before the Fifth Circuit and Properties of the Villages v. FTC before the Eleventh Circuit, accepting the district court decisions find FTC lacked statutory authority to issue this ruling. The court then ordered the Ryan case enjoined the FTC rule, which ended the nationwide ban. Although the categorical prohibition is no longer in effect, the commission will continue to pursue individual enforcement actions, such as collaborating with states' attorneys general, against noncompete agreements that are considered anticompetitive under current law.¹

The actions of the FTC leaves regulation of noncompete agreements primarily to the states, which some have passed or are considering new restrictions. For the veterinary community, Former FTC Chair Lina Khan has stated that veterinarians were some of the most active professionals that submitted comments during the rulemaking process back in 2023.

“I was struck by the extent to which we heard from veterinarians—hundreds of people sharing stories about how noncompetes had buried them in expensive litigation, cost them job opportunities with better wages and conditions, and even forced people to uproot their families or commute hours away,” Khan told attendees during the 2024 AVMA Veterinary Business and Economic Forum.¹

RELATED: FTC bans noncompete agreements in the veterinary profession²

Current FTC Chairman Andrew N. Ferguson cited in a recent FTC action against Gateway Pet Memorial Services, which according to the commission, allegedly used noncompete to stop worker mobility in the pet aftercare industry. The commission found that under a proposed FTC consent order, the company must immediately stop enforcing all of its existing noncompete agreements, among other terms.³

Although majority seem to be in favor of vacating the rule, Commissioner Rebecca Kelly Slaughter, the only dissenting vote, criticized the decision to vacate. She stated that out of roughly 26,000 public comments on the rule, over 25,000 supported a categorical ban. She argued noncompetes "not only present barriers to worker mobility, but suppress wages, prevent new business formation, and slow innovation."

“Today, sadly, the FTC’s Republican majority decided to throw in the towel. In place of a rule to protect nearly all American workers from abusive noncompetes, the majority offers a one off settlement and a request for information (as though the record of tens of thousands of comments does not exist),” Slaughter stated in her statement.⁴

“Perhaps the agency is hoping that, by dismissing the Commission’s appeals and refusing to continue defending the rule in court, no one will notice that the FTC is choosing the side of controlling bosses over American workers. But every worker trapped by a noncompete who would be liberated by this rule—and that is millions of workers in America— knows the truth,” she continued.

The agency is now seeking public comments to gain a better understand of the agreements, plus gather information that can inform future enforcement actions. The deadline to submit a public comment is November 3, 2025, and if anyone wishes to make their submission confidential, they can email noncompete@ftc.gov and mark it as such. Once submitted, comments will be posted to regulations.gov.

The provided list of sample questions for commenters includes:

• Does the employer enforce the noncompete agreements? If so, how?
• Are you aware of former employees covered by the noncompete agreements taking a new job with lower pay or worse conditions to avoid violating the terms of those agreements?
• Are you aware of former employees covered by the noncompete agreements leaving the industry or changing their job type when taking a new job in order to avoid violating the terms of those agreements?
• Are you aware of business owners limiting the geographic territory in which they operate to avoid violating the noncompete agreements with former employers?
• Are you aware of rival employers making job offers that were declined due to the potential employee learning that they are restricted by a noncompete?
• Have any noncompete agreements covering workers in the healthcare sector affected wages, labor mobility, or the availability, quality, or cost of healthcare services in particular? If so, how?

“We are asking the public to help shine a light on unfair and anticompetitive agreements,” said Kelse Moen, Deputy Director of the Bureau of Competition and co-chair of the agency’s Joint Labor Task Force,⁵

“Unreasonable noncompete agreements have proliferated for too long in the dark. With the assistance of the employees and workers most burdened by them, the Trump-Vance FTC intends to uproot the worst offenders and restore fairness to the American labor market. We look forward to closely reviewing every response.”

References

1. FTC vacates noncompete rule, shifts to case-by-case enforcement. News release. American Veterinary Medical Association. September 30, 2025. Accessed October 1, 2025. https://www.avma.org/news/ftc-vacates-noncompete-rule-shifts-case-case-enforcement
2. McCafferty C. FTC bans noncompete agreements in the veterinary profession. April 26, 2025. Accessed October 1, 2025. https://www.dvm360.com/view/ftc-bans-noncompete-agreements-used-by-some-veterinary-employers
3. Federal Trade Commission. Gateway Pet Memorial Services. Federal Trade Commission website. Updated September 4, 2025. Accessed October 1, 2025. https://www.ftc.gov/legal-library/browse/cases-proceedings/gateway-pet-memorial-services.
4. Slaughter RK. Dissenting Statement of Commissioner Rebecca Kelly Slaughter Regarding the Dismissal of Appeals in Noncompete Rule Litigations. Federal Trade Commission. September 5, 2025. Accessed October 1, 2025.https://www.ftc.gov/system/files/ftc_gov/pdf/slaughter-noncompetes-litigation-withdrawal-statement.pdf.
5. Federal Trade Commission Issues Request for Information on Employee Noncompete Agreements. News release. Federal Trade Commission. September 4, 2025. Accessed October 1, 2025. https://www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-issues-request-information-employee-noncompete-agreements