FTC Stops Defending Rule Banning Noncompete Agreements, Opting Instead for “Aggressive” Case-by-Case Enforcement

On September 5, 2025, the Federal Trade Commission (“FTC”) withdrew its appeals of decisions issued by Texas and Florida federal district courts, which enjoined the FTC from enforcing a nationwide rule banning almost all noncompete employment agreements. Companies, however, should not read this decision to mean that their noncompete agreements will no longer be subjected to antitrust scrutiny by federal enforcers. In a statement joined by Commissioner Melissa Holyoak, Chairman Andrew Ferguson stressed that the FTC “will continue to enforce the antitrust laws aggressively against noncompete agreements” and warned that “firms in industries plagued by thickets of noncompete agreements will receive [in the coming days] warning letters from me, urging them to consider abandoning those agreements as the Commission prepares investigations and enforcement actions.”

Moreover, on September 4, 2025, the FTC issued a broad Request for Information (“RFI”) to the public regarding noncompete clauses, which seeks, among other things, the names of companies that may be using anticompetitive noncompete agreements, and specifically identifies healthcare as an industry where it will prioritize enforcement. In addition, on the same day, the FTC brought an enforcement action against a national company whose overly broad noncompete agreements were found to harm competition and workers.

Together, these recent actions and statements by the FTC signal a shift away from the Biden Administration’s categorical approach toward barring noncompete agreements in favor of a return to a more targeted enforcement philosophy that assesses a specific agreement’s potential harm and benefits. 

Withdrawal of Appeals Defending FTC’s Noncompete Ban

In a 3 – 2 vote along partisan lines, the FTC, under the leadership of former Chair Lina Khan, issued a nationwide rule banning almost all noncompete agreements in April 2024. Current Chair Ferguson dissented from that decision and argued that the rule was unlawful, arbitrary, and capricious because it nullified millions of preexisting contracts, preempted the laws of 46 states, and usurped the role of Congress to regulate areas of “tremendous economic and political significance” by redistributing nearly half a trillion dollars through “regulatory fiat.” For more information on the FTC’s vote adopting the rule banning most noncompete agreements, see Crowell’s earlier alert, FTC Issues Final Rule Banning Most Non-Compete Agreements.

Before the rule could take effect, federal district courts in Texas and Florida enjoined the FTC from enforcing the rule, holding that the Commission lacked the authority to issue a nationwide ban on noncompete agreements. (In contrast, a federal district court in Pennsylvania declined to enjoin the FTC from enforcing its noncompete rule.) For more information on these court decisions, see Crowell’s earlier alerts, Texas Federal Court Preliminarily Enjoins FTC’s Non-Compete Ban, But Declines to Issue Nationwide Preliminary Injunction; Diverging from Texas Federal Court’s Preliminary Ruling, Pennsylvania Federal Court Declines to Enjoin FTC’s Rule Banning Non-Compete Agreements; Northern District of Texas Permanently Blocks FTC’s Ban on Non-Competes Nationwide.

Under former Chair Khan’s leadership, the FTC appealed the decisions issued by the Texas and Florida district courts. On September 5, 2025, however, current Chair Ferguson announced that the FTC decided, in a 3 – 1 decision along partisan lines, to withdraw these appeals, stating that “Commissioner Holyoak and I warned our Democrat colleagues at great length that the Rule was unlawful six ways from Sunday; that the Rule would never survive judicial review; and that the resources sunk into the Rule’s promulgation and defense would be wasted.”

Although the agency opted to discontinue defending the noncompete rule, Chair Ferguson cautioned that the FTC’s enforcement agenda will continue to focus on noncompete agreements because these agreements “can be pernicious” and “sometimes are[] abused to the effect of severely inhibiting workers’ ability to make a living.” He also warned that companies in industries that over-use noncompete agreements will be receiving warning letters in the coming days which advise them to cease enforcing agreements that harm competition and workers.

In dissenting from the decision to withdraw the appeals, newly reinstated Commissioner Rebecca Slaughter argued that the noncompete rule reflected the FTC’s careful consideration of 26,000 public comments and that the decision to cease defending the rule showed that the Trump Administration was “throw[ing] in the towel on years of work by the agency to protect workers from draconian noncompete agreements that lower wages, trap workers in abusive jobs, and even inhibit new business formation.” She also argued that the FTC cannot rescind its noncompete rule without “follow[ing] the legal process of notice and comment set forth by the Administrative Procedure Act.”^[1]

RFI on Noncompete Agreements 

In its RFI, which was issued on September 4, 2025, the FTC explains its concerns that noncompete agreements “bind workers across the economy, from lower-wage employees, such as security guards and glass manufacturing workers, to higher-wage physicians, nurses, and veterinarians[.]” The FTC asks for commenters to identify by name “which specific employers continue to impose noncompete agreements” and seeks this information from all members of the public—including current and former employees, employers that can speak to a rival’s noncompete agreements, and specifically, “market participants in the healthcare sector.” Comments are due by November 3, 2025, and commenters may submit their comments confidentially.

The FTC lays out thirteen questions for commenters to consider, including:

• Do the noncompete agreements harm current or former employees who take, consider taking, or would like to take new jobs? 
• Do the noncompete agreements make it more difficult for rival employers to hire employees? 
• Are you aware of the employer using non-solicitation or non-recruitment agreements that limit former employees from working with the employer’s former customers or former employees? 
• 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? 

These questions reveal several focal points of this request and the FTC’s eventual enforcement goals. Not only is the FTC seeking specific employer names, but the scope of this request is broader than just noncompete agreements. It asks for information on non-solicitation or non-recruitment agreements, as well as actions by rival employers that may affect labor markets. Additionally, the FTC has specifically homed in on the use of noncompete agreements in the healthcare sector.

The scope of this request also underscores that Chairman Ferguson’s FTC will focus on addressing noncompete agreements through enforcement actions rather than rulemaking, a marked shift from the prior administration.

Enforcement Action Against Gateway Services

On the very same day that it issued its RFI, the FTC announced it had filed a complaint against Gateway Services. In the complaint, the FTC alleges the pet cremation services company imposed noncompete agreements on nearly all of its 1,800 employees which prohibited them from working in the same industry anywhere in the United States for one year after the end of their employment. The complaint raises several concerns, including that the company uses non-compete agreements without regard for any “individualized consideration of an employee’s role” and deploys noncompete agreements as a direct response to threats of new competitors entering the market.

The proposed consent order would require Gateway Services to—with only limited exceptions—stop enforcing or entering into noncompete agreements and limit the circumstances when it could enter into customer non-solicitation agreements. This RFI and enforcement action follow the FTC’s launch of a Joint Labor Task Force in February 2025, which signaled the Commission’s intent to pursue a case-by-case enforcement strategy regarding noncompete agreements.

Practical Implications: What Employers Should Consider Doing 

With the FTC vowing to continue to scrutinize noncompete agreements and take action against those deemed anticompetitive, employers—particularly those in the healthcare sector and other sectors where noncompete agreements may be common—would be prudent in taking the following steps to help ensure their noncompete agreements comply with the antitrust laws: 

• Review contracts and practices. Scrutinize noncompete clauses for “duration or geographic scope,” and ensure necessity.  
• Assess risk and compliance. Evaluate whether agreements “unjustifiably prevent workers from moving to better jobs, impede new business formation, prevent the shift of labor from over-served to under-served markets, and harm rival employers’ ability to compete.” 
• Prepare supporting documentation. Articulate legitimate business needs and consider alternatives for noncompete agreements.  
• Be ready for enforcement and public scrutiny. The agency is seeking “examples” of employees harmed, including where “current employees avoid seeking or turn down new job opportunities because of the noncompete agreements.” 

What Employers Should Expect

The FTC’s actions and RFI highlight several important trends that employers must take seriously: 

• Active enforcement is underway. The Gateway case shows the agency’s willingness to directly intervene against broad noncompete agreements, especially when they apply to large segments of the workforce. 
• Healthcare is a priority. Both the RFI and recent enforcement matters focus on potential downstream effects of noncompete agreements on wages, staffing, and patient access in healthcare markets. 
• Evidence-based policymaking is building. By collecting real-world data and examples, the FTC is positioning itself for sustained case-by-case enforcement and possible future, narrower rulemaking. 
• State–federal interplay is intensifying. State attorneys general and private litigants are likely to mirror or build on FTC theories, creating parallel risks for employers. 
• Transparency and public participation are expanding. With a confidential submission process and encouragement of employee and employer input, the FTC is broadening its fact-gathering base beyond traditional investigations. 

Key Takeaway

Employers should expect both near-term enforcement and longer-term structural changes in noncompete oversight. The best defense is early action: review contract terms, document legitimate justifications, and prepare for heightened scrutiny. With the FTC prioritizing direct enforcement and evidence-based policymaking, companies—especially in healthcare and other labor markets that may commonly rely on noncompete agreements—should act quickly and engage outside antitrust counsel to ensure compliance.