FTC Abandons Non-Compete Rule; Will Seek Case-By-Case Approach

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In a widely expected move following President Donald J. Trump’s 2024 re-election, the Federal Trade Commission (FTC) voluntarily dismissed its appeal of a ruling that halted enforcement of a Biden-era FTC rule banning most employee non-compete provisions.

As we previously reported, in August 2024, a U.S. District Court in Texas struck down the then-pending ban, concluding the FTC rule exceeded the FTC’s authority.

What is Next?

In the short term, companies nationwide can expect the FTC to pivot from broad-ranging non-compete regulation toward a more nuanced, case-by-case approach. We also expect an uptick in non-compete-related activity from state legislatures, several of which--including New Jersey--are currently considering bills limiting or outright banning non-competes. As we previously reported, many states, including California, Colorado, Illinois, North Dakota, Oklahoma, Massachusetts, Washington D.C., Oregon, Minnesota and Washington, already ban or heavily restrict the use and administration of non-compete covenants. Companies with employees and contractors in states where non-compete covenants are banned or heavily restricted must carefully review their restrictive covenant agreements for compliance with state law and consider whether to shift their focus to confidentiality and non-solicitation agreements to protect their confidential information, business relationships and their investment in their workforce.

Quarles will continue to monitor the status of non-compete related developments at both the state and federal level.

For additional information and questions about how this decision may affect your business or for guidance on compliance with state law with respect to restrictive covenants, please contact your Quarles & Brady attorney or:

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