On September 5, 2025, the U.S. Federal Trade Commission (FTC) confirmed that it is abandoning a Biden-era rule that, had it taken effect, would have barred the use of virtually all noncompete agreements across the country. While that long-expected announcement was welcome news to the business community, it does not necessarily mean that the increased scrutiny of noncompete agreements that has arisen over the past several years is anywhere close to receding. Indeed, in addition to a bevy of restrictive state laws, the FTC itself took action on September 10, 2025, making clear that it very much intends to pursue claims against employers the commission believes utilize impermissible noncompete agreements.
Background on the FTC’s noncompete rule
Under the Biden Administration, the FTC devoted much of its efforts to crafting a regulatory rule to limit the use of noncompete agreements in the U.S. This ultimately culminated in the commission’s May 2024 publication of a final rule that would have banned effectively all existing and future U.S. noncompete agreements.
As anticipated, litigation challenging the final rule immediately ensued and, on August 20, 2024, a Texas federal court judge concluded that the rule is unconstitutional and issued a nationwide ban on the rule taking effect. Though the FTC appealed the decision, with the change in presidential administrations and the corresponding shakeup in FTC leadership, it was widely expected that the commission would drop its appeal and, thereby, let the May 2024 final rule finally fall to the wayside.
After months of speculation, on September 5, 2025, the FTC indeed confirmed that it was no longer pursuing its appeal of the August 2024 ruling. In a statement, FTC Chairman Andrew N. Ferguson stated that “[t]he Rule’s illegality was patently obvious” and called the commission’s years-long efforts regarding the rule a “wasteful exercise[.]”
Where does this leave U.S. businesses?
Despite the FTC’s decision to abandon the noncompete rule, U.S. employers are not necessarily in the clear when it comes to the use of noncompete agreements, especially when such agreements are used with low-wage workers. This is the case for several reasons.
First, over the past decade or so, a broad swath of U.S. states have adopted laws limiting the use of noncompete agreements. For instance, several states — including Illinois and Nevada — have enacted laws limiting noncompete agreements to employees making over a certain pay threshold or barring such agreements from being used with hourly or low wage workers.
Still, other states have adopted procedural hurdles that employers must satisfy in order to ensure a valid and enforceable noncompete. In Massachusetts, for instance, an employer must provide a prospective employee with written notice of a noncompete agreement “by the earlier of a formal offer of employment or 10 business days before the commencement of the employee’s employment.” Similarly, Colorado requires that written notice of a noncompete be provided to a new hire before they accept an offer of employment.
And finally, some states have outright barred the use of noncompete agreements altogether. The list of such states now includes Minnesota, in addition to California and others.
Second, in still other states, we have witnessed a shift in the judiciary’s receptiveness to enforcing noncompete agreements. Delaware, for instance, was long viewed as a jurisdiction that was friendly to the use of noncompete agreements (which led many businesses to historically include a Delaware choice-of-law clause in their noncompete).
In the last few years, however, though state lawmakers have not adopted any noncompete-specific legislation, Delaware judges have demonstrated a growing hesitance to enforce noncompete agreements. This is particularly true with regard to noncompetes the judiciary deems overbroad as drafted. Whereas Delaware courts were historically receptive to judicially rewriting — also known as “blue penciling” — such agreements, several recent decisions cast doubt on their continued willingness to do so.
Third, the FTC has made clear that it still very much intends to prosecute the use of noncompete agreements it deems impermissible. To that end, in his September 5 statement, Chairman Ferguson was careful to note that the current iteration of the FTC “has already moved aggressively against unlawful noncompete agreements. . . . And in the coming days, firms in industries plagued by thickets of noncompete agreements will receive warning letters from me, urging them to consider abandoning those agreements as the Commission prepares investigations and enforcement actions. . . . As the above indicates, we will continue to enforce the antitrust laws aggressively against noncompete agreements.”
The FTC has already started to follow through on this, announcing on September 10, 2025, that it sent letters to several undisclosed healthcare and staffing businesses warning them about the use of broad noncompete agreements. In the letter, Chairman Ferguson notes that, “[w]hile narrowly tailored noncompetes can serve valid purposes in certain circumstances, available evidence indicates that in practice many employers impose noncompetes without due consideration to whether they are necessary and appropriate under the circumstances, including whether less restrictive alternative contract terms may sufficiently achieve the same procompetitive purposes. For example, noncompetes may be overbroad in duration or geographic scope. Or they may be inappropriate for certain roles entirely.”
The chairman closes the letter by further noting that “[t]he FTC is focusing resources on enforcing Section 5 of the FTC Act against unlawful noncompetes, particularly in the healthcare sector. Accordingly, I encourage you to conduct a comprehensive review of your employment agreements— including any noncompetes or other restrictive covenants — to ensure that they comply with applicable laws and are appropriately tailored to the circumstances. If your company is currently using noncompetes that are unfair or anticompetitive under the FTC Act, I strongly encourage you to discontinue them immediately and to notify relevant employees of the discontinuance.”
Final thoughts
Any U.S. businesses — regardless of size, location, or industry — that utilize noncompete agreements to any extent would be wise to heed Chairman Ferguson’s words and promptly review their noncompete arrangements. A holistic review would include an assessment of, among other things, the specific language of the noncompete at issue (including whether it has a reasonable geographic scope and temporal limit), potentially applicable state law concerns, as well as any industry-specific considerations. As scrutiny over the use of noncompete agreements appears to be showing no signs of slowing, it is proactive businesses who will be best positioned if and when a challenge arises.
