You may well recall the genesis of the FTC's rule seeking to broadly ban noncompete agreements nationwide; it goes back to then-President Biden's Executive Order from July, 2021, where he specifically charged the FTC with the responsibility of seeking ways to flex its regulatory rulemaking authority to curb (or eliminate) the use of noncompete agreements, stating, in pertinent part, as follows:
Executive Order 14036—Promoting Competition in the American Economy July 9, 2021
Sec. 5. Further Agency Responsibilities. (a) The heads of all agencies shall consider using their authorities to further the policies set forth in section 1 of this order, with particular attention to: (i) the influence of any of their respective regulations, particularly any licensing regulations, on concentration and competition in the industries under their jurisdiction; and (ii) the potential for their procurement or other spending to improve the competitiveness of small businesses and businesses with fair labor practices. (b) The Attorney General, the Chair of the FTC, and the heads of other agencies with authority to enforce the Clayton Act are encouraged to enforce the antitrust laws fairly and vigorously.
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(g) To address agreements that may unduly limit workers' ability to change jobs, the Chair of the FTC is encouraged to consider working with the rest of the Commission to exercise the FTC's statutory rulemaking authority under the Federal Trade Commission Act to curtail the unfair use of non-compete clauses and other clauses or agreements that may unfairly limit worker mobility. (h) To address persistent and recurrent practices that inhibit competition, the Chair of the FTC, in the Chair's discretion, is also encouraged to consider working with the rest of the Commission to exercise the FTC's statutory rulemaking authority, as appropriate and consistent with applicable law, in areas such as: (i) unfair data collection and surveillance practices that may damage competition, consumer autonomy, and consumer privacy; (ii) unfair anticompetitive restrictions on third-party repair or self-repair of items, such as the restrictions imposed by powerful manufacturers that prevent farmers from repairing their own equipment; ... and (vii) any other unfair industry-specific practices that substantially inhibit competition.
The FTC's Non-Compete Ban a/k/a the "Final Rule"
That, in turn, resulted directly in then FTC Chair Lina Khan's proposed noncompete ban, the "Final Rule," which was codified at 16 CFR Parts 910 and 912, and were summarized by the FTC itself as follows:
Pursuant to the Federal Trade Commission Act (“FTC Act”), the Federal Trade Commission (“Commission”) is issuing the Non-Compete Clause Rule (“the final rule”). The final rule provides that it is an unfair method of competition for persons to, among other things, enter into non-compete clauses (“non-competes”) with workers on or after the final rule's effective date. With respect to existing non-competes— i.e., non-competes entered into before the effective date—the final rule adopts a different approach for senior executives than for other workers. For senior executives, existing non-competes can remain in force, while existing non-competes with other workers are not enforceable after the effective date.
Shortly before the FTC's Final Rule was due to become effective on September 4, 2024, however, two Federal courts stepped in, the first being the Texas District Court in the Ryan case, and issued an order staying the enforcement of the Final Rule on a number of grounds, including that in promulgating the Final Rule, the FTC had exceeded its rulemaking authority, and furthermore, that
[T]here is a substantial likelihood the Rule is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation. It imposes a one-size-fits-all approach with no end date, which fails to establish a 'rational connection between the facts found and the choice made' ... In enacting the Rule, the Commission relied on a handful of studies that examined the economic effects of various state policies toward non-competes ... The Commission’s lack of evidence as to why they chose to impose such a sweeping prohibition—that prohibits entering or enforcing virtually all non-competes—instead of targeting specific, harmful non-competes, renders the Rule arbitrary and capricious.
The drama certainly did not end there, however.
First, the U.S. Supreme Court later held that the Ryan court exceeded its authority in issuing a nationwide injunction on enforcement of the Final Rule, when it should have limited its injunction to the case and parties that were before it.
Then, came the Presidential election, with the Republicans return to the Executive Office, and significant personnel and ideological shifts at the FTC - some of which are still the subject of ongoing litigation before the courts. During this time, the FTC sought - and was granted - a number of extensions of time to file its appellate briefs in the Ryan (and other) matters where the Final Rule had been held unconstitutional.
What Just Happened
After all those proverbial musical chairs, last week, on August 13, 2025, President Trump rescinded President Biden's underlying Executive Order that had pushed the FTC to promulgate the Final Rule in the first instance, stating in cursory fashion, as follows:
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered:
Section 1. Revocation. Executive Order 14036 of July 9, 2021 (Promoting Competition in the American Economy), is hereby revoked.
What is Likely to Happen Now
Does this mean that the FTC has wholly abandoned any attempts to regulate noncompete agreements? Hardly. Employers should remain wary of noncompete abuse, particularly vis-a-vis low-wage workers, where an employer has no legitimate business interest worthy of judicial or contractual protection that would ostensibly prevent those workers from securing more beneficial employment in the same industry. In that same vein, employers should recognize that the regulatory winds could change rather quickly - as they did with the last election - and the pendulum could just as easily swing back in the opposite direction, and should adapt their restrictive covenants accordingly.
