Recent enforcement actions and policy initiatives suggest that the FTC will continue to pursue noncompetes and similar labor market restrictive covenants through alternative strategies.

The Federal Trade Commission (FTC) has formally abandoned its appeals in Ryan, LLC v. FTC (5th Cir.) and Properties of the Villages v. FTC (11th Cir.), effectively conceding the vacatur of its proposed nationwide ban on noncompete agreements. While this decision confirms that the FTC’s sweeping noncompete rule will not take effect, employers should not interpret the move as a retreat from scrutiny of post-employment restrictive covenants. On the contrary, recent enforcement actions and policy initiatives suggest that the FTC will continue to pursue noncompetes and similar labor market restrictive covenants through alternative strategies.

Background of the FTC Noncompete Rule

As reported in our prior Alerts (including on April 23, July 3 and 24, August 8 and 21, 2024), the FTC voted 3-2 in April 2024 to approve a final rule effective on September 4, 2024, that would have:

• Banned noncompete agreements with virtually all workers after the effective date;
• Invalidated existing noncompetes with all workers except senior executives; and
• Required employers to send a clear and conspicuous notice to affected workers, by the effective date, that the worker’s noncompete clause will not and cannot be legally enforced. 

The noncompete rule would have also displaced conflicting state laws.

The rule faced immediate legal challenges. In Ryan, LLC v. FTC, a Texas-based tax services firm argued that the FTC lacked statutory and constitutional authority to issue such a regulation. Similarly, in Properties of the Villages v. FTC, a Florida real estate company challenged the rule’s application to its employment agreements. In both cases, federal district courts sided with the challengers, holding that the FTC exceeded its authority and enjoining enforcement of the rule.

The FTC initially appealed these decisions. On March 7, 2025, the FTC asked the circuit courts to stay both appeals for 120 days to allow the FTC time to "reconsider its defense of the challenged rule." The FTC cited public comments by new FTC Chairman Andrew Ferguson: “My view is that the Commission … basically needs to decide whether it’s a good idea [and] it’s in the public interest to continue defending this rule.” Prior to his appointment as chairman, then-member Ferguson released a dissenting statement against the rule, arguing that the FTC lacked rulemaking authority under Section 6(g) to broadly regulate all private employment contracts in the United States. Both courts granted the FTC’s requests for stays and continuations of the stays, giving the FTC until September to determine its next steps.

FTC Votes to Abandon Its Noncompete Rule

On September 5, 2025, the commission voted 3-1 to dismiss the appeals and accede to vacatur of the rule. Chairman Ferguson and Commissioner Melissa Holyoak—who dissented from the rule when it was first issued—joined in a statement emphasizing their longstanding view that the FTC lacks rulemaking authority over competition-related matters. Commissioner Mark R. Meador issued a concurring statement, while Commissioner Rebecca Slaughter dissented, arguing that abandoning the appeals undermines worker protections.

Noncompetes Remain a Priority

Although the FTC has now formally abandoned its effort to impose a nationwide ban by rule, it has simultaneously taken steps that confirm restrictive covenants remain a priority.

In February 2025, Chairman Ferguson created a Joint Labor Task Force to coordinate enforcement strategies focused on noncompete, no-poach, nonsolicitation and no-hire agreements.

More recently, on September 3, 2025, the FTC announced the launch of a public inquiry aimed at assessing the scope, prevalence and impact of employer noncompete agreements in the U.S. labor market. The FTC’s request for information signals the agency’s continued focus on labor market practices and its willingness to explore potential enforcement or rulemaking to curb what it views as anticompetitive restrictions on worker mobility.

Alongside the inquiry, on September 4, 2025, the FTC announced an enforcement action against Gateway Services Inc., the nation’s largest pet cremation business. According to the FTC’s complaint, Gateway imposed noncompetes on nearly all employees—ranging from executives to hourly workers—restricting them from working in the industry nationwide for one year post-employment.

The FTC’s Public Inquiry on Noncompetes

The FTC is seeking input from a broad range of stakeholders, including:

• Current and former employees restricted by noncompetes;
• Employers experiencing hiring challenges due to rival noncompete restrictions; and
• Other members of the public with relevant experience or insights.

The agency’s stated goal is to “shine a light on unfair and anticompetitive agreements” and to build a record that could inform both future enforcement actions and possible regulatory initiatives.

The key details contained in the inquiry are as follows:

• Comment period: Interested parties have 60 days—until November 3, 2025—to submit comments via regulations.gov.
• Confidential submissions: Parties seeking to submit confidential, nonpublic comments should follow the alternative submission guidelines outlined in the FTC’s request for information.

Next Steps

Following review of public comments, the FTC may consider policy guidance, enforcement actions or new rulemaking initiatives targeting noncompete restrictions.

Recent FTC Enforcement Action

On September 4, 2025, the FTC charged Gateway Services Inc., a pet cremation services company with over 1,900 employees, with violating Section 5 of the FTC Act, asserting that Gateway's policy, in place since 2019, of requiring all newly hired employees (other than in California) to sign 12-month, post-employment noncompete agreements is an unfair method of competition. Given this policy, nearly 1,800 of Gateway's employees were subject to post-employment noncompetes, including hourly workers, regardless of skill level or job duties.

Under a proposed FTC consent order, Gateway must:

• Cease enforcing existing noncompetes and refrain from entering into new ones, subject to narrow exceptions. The FTC’s proposed order would not apply to noncompete covenants entered with Gateway’s directors, officers or senior employees in connection with the grant of equity or equity-based compensation. In addition, Gateway would still be permitted use noncompete agreements in connection with the bona fide sale of a business, provided the individuals bound by the agreement hold a preexisting equity interest in the business being sold;
• Notify affected employees that they are no longer bound by noncompetes; and
• Limit nonsolicitation restrictions to customers with whom the employee had direct contact in the prior 12 months.

If finalized, the Gateway order will release approximately 1,800 employees from their noncompete obligations.

In announcing the action, FTC Bureau of Competition Director Daniel Guarnera emphasized the agency’s ongoing commitment to thwarting anticompetitive practices:

The Commission will stand up for workers and ensure that they receive all the benefits that flow from robust competition between employers. The antitrust laws protect workers from noncompete agreements that harm competition, including by preventing workers from switching to better-paying jobs or starting their own businesses. We will protect workers by enforcing the laws against anticompetitive noncompetes.

What This Means for Employers

The FTC’s latest actions continue a trend of federal and state efforts to limit or prohibit the use of noncompetes. The FTC’s decision to dismiss its appeals confirms that the nationwide noncompete ban is off the table—at least for now. But, the FTC has made clear through its September public inquiry and recent enforcement action against Gateway that restrictive covenants remain a top enforcement priority.

Employers should anticipate increased case-by-case challenges and continued state legislative activity. Now is the time to review existing practices and work with counsel to mitigate risk in this fast-evolving landscape. Accordingly, employers should consult with legal counsel to take proactive steps to mitigate risk:

• Audit existing agreements and policies: Review current noncompete, nonsolicit, and other restrictive covenant agreements and policies with counsel to assess scope, necessity, and enforceability, and the roles to which they apply.
• Evaluate alternatives: Consider with counsel whether narrower tools, such as nondisclosure or nonsolicitation covenants, may adequately protect legitimate business interests.
• Monitor developments: The FTC’s inquiry could lead to significant changes in the legal landscape governing restrictive covenants. Employers that rely heavily on noncompetes should stay informed and be prepared to adjust compliance strategies.

For More Information

If you have any questions about this Alert, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, Bryan Shapiro, any of the attorneys in our Trade Secrets and Non-Compete Group, Sean P. McConnell, any of the attorneys in our Antitrust and Competition Group, any of the attorneys in our Employment, Labor, Benefits and Immigration Practice Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm's full disclaimer.