The legal landscape surrounding non-compete agreements remains in a state of flux, shaped by shifting federal priorities, evolving state laws, and ongoing judicial challenges. Once a standard feature in many employment contracts, non-compete clauses are now at the center of a national debate over worker rights, business interests, and economic mobility.

FTC’s Ban and Strategic Shift

In 2024, the Federal Trade Commission (FTC) proposed a sweeping rule to ban nearly all non-compete agreements nationwide. The rule aimed to invalidate existing non-competes and prohibit new ones, with limited exceptions for senior executives. The FTC projected that this move could boost wages, foster entrepreneurship, and reduce healthcare costs.

However, the rule was quickly met with legal resistance. A federal court in Texas issued an injunction halting its enforcement, and in early 2025, the FTC—under new leadership—paused its appeal.

In February 2025, FTC Chairman Andrew N. Ferguson issued a memorandum announcing the formation of a Joint Labor Task Force. This task force is designed to investigate and prosecute anticompetitive labor practices, with non-compete agreements explicitly identified as a major concern. The memo described non-competes as tools that can impose “unnecessary, onerous, and often lengthy restrictions” on workers’ ability to find new employment

The move suggests a pivot toward targeted enforcement rather than broad rulemaking, but the state of federal law and guidance on non-competes remains to be seen.

NLRB Memo Rescission

The National Labor Relations Board (NLRB) also shifted its stance on non-competes. Under former General Counsel Jennifer Abruzzo, the NLRB had issued guidance asserting that non-compete clauses violated Section 7 of the National Labor Relations Act by restricting workers’ rights to seek new employment or organize collectively. These memos were rescinded in early 2025 by Acting General Counsel William B. Cowen, through GC 25-05.

Cowen noted, “Over the past few years, our dedicated and talented staff have worked diligently to process an ever-increasing workload. Notwithstanding these efforts, we have seen our backlog of cases grow to the point where it is no longer sustainable. The unfortunate truth is that if we attempt to accomplish everything, we risk accomplishing nothing.”

The NLRB’s recession of prior memoranda doesn’t necessarily signal a roll-back of policy on non-competes, but rather, a strategic reprioritization aimed at reducing case backlog and focusing limited resources on the most pressing and enforceable labor violations.

State-Level Momentum

Despite federal uncertainty, states continue to lead the charge in regulating non-competes. For example, states like California, Minnesota, Oklahoma, and North Dakota maintain very broad non-compete bans.  Other states, like Colorado, Illinois, and Washington, D.C., have implemented income-based thresholds, barring non-competes for lower-wage workers. Additionally, several states have enacted or expanded restrictions on non-competes for healthcare professionals, aiming to address workforce shortages and improve access to care.

Looking Ahead

As the legal environment continues to evolve, employers must stay vigilant. While federal enforcement has softened, state-level reforms and targeted investigations remain active. Employers are encouraged to review their employment agreements and consider alternatives—such as non-solicitation and confidentiality clauses—that offer protection without running afoul of changing laws. Additionally, careful consideration of geographic and temporal scope of agreements in accordance with state and local laws is required when seeking to draft enforceable agreements.

Questions?

For further guidance on non-competes, please contact the author Saniya Khare.