Key points:
- The FTC is ending efforts to defend its noncompete ban in court.
- Two appeals have been voluntarily dismissed in the 5th and 11th Circuits.
- The move reverses a signature policy of the Biden-era FTC.
- Roughly 20% of U.S. workers remain covered by noncompete contracts.
The Federal Trade Commission will no longer defend its near-total ban on worker noncompete agreements, marking a sharp reversal from the Biden administration’s regulatory agenda. On September 5, the FTC filed motions in two federal appeals courts to voluntarily dismiss pending cases, signaling the end of its litigation campaign to preserve the rule according to Bloomberg Law.
The rule, finalized in 2024, would have prohibited most noncompete contracts, a practice that restricts workers from moving freely within their industries. The FTC estimated that about one in five U.S. workers are subject to such agreements. But in August 2024, Judge Ada Brown of the Northern District of Texas vacated the rule nationwide, siding with the U.S. Chamber of Commerce and Texas-based Ryan LLC, which argued the FTC lacked the authority to impose such sweeping labor regulations.
In January, the agency appealed to the Fifth Circuit, while also challenging a separate ruling in the Eleventh Circuit that applied the Supreme Court’s “major questions” doctrine to strike down the rule. Those appeals are now abandoned. The cases—Ryan v. FTC, 5th Cir., 24-10951, and Properties of the Villages v. FTC, 11th Cir., 24-13102—are formally dismissed as of September 5.
Andrew Ferguson, now the FTC’s chair, had dissented from the rule as a commissioner, arguing that the agency was exceeding its congressional mandate. His position now guides the FTC’s stance. Former chair Lina Khan defended the rule as central to the FTC’s mission to prevent unfair competition, citing more than 25,000 public comments that supported its adoption.
The noncompete retreat underscores a broader shift in the FTC’s litigation priorities. In July, the Eighth Circuit struck down another Biden-era rule requiring businesses to simplify subscription cancellations. For employers, the latest move reduces immediate regulatory risk, though state-level restrictions on noncompetes and potential legislative proposals remain relevant considerations. For in-house counsel, the practical impact is that compliance strategies can revert to the pre-rule status quo, but legal teams will need to monitor whether Congress or state legislatures revisit the issue.
