Quick Hits

• The Trump administration is seeking to pause the FTC’s pursuit of appeals of two district court decisions that blocked the FTC’s rule banning noncompetes, suggesting an expected shift in the government’s approach to the rule.
• Despite the motions to stay, and though the FTC may not pursue any further formal rulemaking on the issue, FTC Chairman Andrew N. Ferguson is continuing to emphasize his view that noncompete agreements potentially harm competition in labor markets.

The Government’s Motions

On April 23, 2024, the Biden-era FTC under then-Chair Lina Khan voted 3–2 to adopt a final rule that would have banned nearly all noncompete agreements in employment. The vote split along party lines, with both Republican commissioners voting against it. In a dissenting statement issued on June 28, 2024, then-Member Ferguson argued the rule was unlawful and “by far the most extraordinary assertion of authority in the Commission’s history.”

In August 2024, the U.S. District Court for the Northern District of Texas invalidated and set aside the FTC noncompete rule, finding it exceeded the FTC’s authority and was arbitrary and capricious. That ruling came after a preliminary injunction ruling by the U.S. District Court for the Middle District of Florida that blocked the ban as to the parties in that case. The FTC appealed both rulings.

After President Trump was elected to a second term, questions remained about whether the government would continue to defend the FTC rule. On President Trump’s first day in office, January 20, 2025, he designated then-Member Ferguson, who had voted against the FTC rule, as the new chairman of the FTC.

On March 7, 2025, the federal government filed motions for a 120-day stay of its challenges in the U.S. Court of Appeals for the Fifth and Eleventh Circuits. The appeals courts are considering the lower federal court rulings in Texas and Florida that invalidated or enjoined, respectively, the Biden-era FTC rule that would have banned nearly all noncompete agreements.

Both motions cited public comments questioning the rule by new FTC Chairman Andrew N. 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,” Ferguson stated. “I’m going to be presenting at some point [to] my colleagues the decision about whether to continue defending this rule.”

Still, as FTC chairman, Ferguson has questioned whether unreasonable and broad noncompete agreements might harm competition in labor markets and has launched a task force to protect competition in the antitrust context, in part by targeting unreasonable noncompete agreements and no-poach, non-solicitation, and no-hire agreements.

Next Steps

While employers wait on the potential outcomes of the Trump administration’s moves, including whether it stops its defense of the rule or ultimately drops the rule altogether, the reality remains that the FTC will maintain some level of scrutiny of noncompete agreements and their potential impact on labor markets—at least in the antitrust context. To increase chances of withstanding scrutiny under the FTC’s latest agenda and under existing and developing state law, employers should continue to ensure that restrictive covenants are narrowly tailored as needed to protect their legitimate business interests, including with respect to confidential information (trade secrets), goodwill in customers and employees, and unfair competition.