September 30, 2025

Non-Compete Provisions and the FTC: New Developments

Shortly after Labor Day 2025, the Federal Trade Commission (FTC) announced that it would no longer pursue a nationwide ban on non-compete clauses. The FTC made clear, however, that this does not give a stamp of approval to such clauses. Rather, the FTC stated that it would use other laws, such as antitrust laws, to pursue employers and industries that impose unfair and unreasonable non-compete restrictions on their workers. As an example, the FTC filed a claim against a pet cremation service that prohibited its employees, for one year after leaving the company, from working anywhere in the U.S. in the pet cremation industry. The FTC also invited public submissions regarding non-compete provisions.

Non-compete clauses, which are often found in employment agreements, restrict employees from moving to a company or starting a business that competes with their former employer. Employers use these clauses to help protect their proprietary information, trade secrets, and business relationships. Employees and the FTC counter that non-compete agreements harm competition by preventing employees from moving to better-paying jobs or opening a new business.

In April 2024, under the Biden administration, the FTC issued a “final rule” that would have banned noncompete clauses nationwide. Within days, businesses and business organizations filed lawsuits in several states, challenging the FTC’s authority to issue the final rule. A federal court in Texas ruled against the FTC and blocked the rule from taking effect. The FTC appealed to the US Court of Appeals for the Fifth Circuit. That’s where matters stood in January 2025. Under the Trump administration, the FTC twice paused its appeal and has now dropped it altogether.

At this point, employers who use or plan to use non-compete clauses should consider three things:

• Whether their clauses are reasonable in scope, as needed to protect the employer’s proprietary information and business, without being overly burdensome on employees.
• Whether any applicable state law bans or limits non-competes. Currently, both New York and New Jersey courts apply a “reasonableness” standard when evaluating non-compete clauses. But in the past few years, legislation seeking to limit or ban the use of non-competes was introduced in both states and passed in NY (but vetoed by the Governor). Other states ban non- compete clauses or limit their use to employees above a wage threshold.
• Whether other clauses and agreements, such as confidentiality, non-solicitation, and work-for-hire clauses, can be crafted to better protect employers’ proprietary information and business relationships.

If you have questions about non-compete clauses, employment agreements, or other employment matters, please contact Chaim Book at cbook@booklawllp.com, Sheryl Galler at sgaller@booklawllp.com, or Rebecca Nathanson at rnathanson@booklawllp.com.