In 2024, the Federal Trade Commission (FTC) introduced a rule that would have prohibited noncompete agreements nationwide. However, employers challenged the rule in multiple forums and secured victories before the National Labor Relations Board and U.S. District Courts in Texas and Florida. These outcomes led to a permanent injunction blocking the rule as of August 20, 2024.
Status of the Appeals
- The FTC appealed the Texas and Florida decisions to the Fifth and Eleventh Circuit Courts of Appeals.
- In February 2025, FTC Chairman Andrew Ferguson indicated the agency would reevaluate its strategy.
- Ferguson also directed the formation of a labor task force to investigate deceptive and anticompetitive labor practices, including noncompete agreements.
- The FTC requested a 120-day stay in both appeals, which was granted. The cases are now on hold until July 2025.
Impact on Employers
With the FTC rule on hold, the enforceability of noncompete agreements continues to be governed by state law, which varies widely across jurisdictions. Some states, such as California, broadly prohibit noncompete agreements, while others, like Ohio, are considering similar restrictions. In Washington, employers may face penalties if they attempt to enforce a noncompete that is deemed invalid under state law.
Alternative Protections for Employers
Even in states where noncompetes are unenforceable, employers can use alternative contractual protections:
- Confidentiality clauses to safeguard proprietary information.
- Non-solicitation clauses to prevent former employees from targeting clients or co-workers.
Although these measures offer more limited protection than noncompete agreements, they still help preserve business interests.
Recommended Next Steps
Employers should consult with legal counsel to ensure their agreements align with current state law. Regular reviews are especially important as state-level legislation continues to evolve.
If you have any questions regarding noncompete agreements, please contact any member of the Forework team.