FTC Nationwide NonCompete Ban Set Aside - FTC Appeals

(Read the July 2026 Update FTC Continues Enforcement Against Employee Noncompetes After Nationwide Rule Is Vacated on the FTC NonCompete Ban)

On April 23, 2024, the Federal Trade Commission issued a final Rule banning non-competes nationwide to “promote competition” and protect “the fundamental freedom of

workers to change jobs, increasing innovation, and fostering new business formation.” Under the Rule, existing non-competes for a vast majority of workers would no longer be enforceable after the Rule’s effective date in September 2024. The Rule carved out an exception as to existing non-competes for senior executives (workers earning more than $151,164 annually and who are in policy-making positions). Such non-competes which would remain in force, but employers would be banned from entering into or attempting to enforce any new non-competes, even if they involve senior executives. The Rule also required employers to provide notice to workers other than senior executives bound by an existing noncompete that they will not be enforcing any non-competes against them.

On August 20, 2024, a federal district court in Texas set aside the Rule and prohibited the FTC from enforcing it. The court held that the FTC exceeded its statutory authority in implementing the Rule, finding that Congress did not grant the FTC the affirmative authority to make substantive rules regarding unfair methods of competition. The order prohibiting the FTC from enforcing the Rule applies nationwide.

On October 18, 2024, the FTC filed a Notice of Appeal in the Fifth Circuit Court of Appeals and it's opening brief was filed on January 2, 2025. The FTC’s likelihood of success on the merits will no doubt be affected by the Supreme Court’s June 28, 2024 decision in Loper Bright Enterprises v. Raimondo, which overruled long-standing precedent under which courts afford deference to a federal agency’s interpretation of its own power (known as “Chevron deference”). Without Chevron deference, the FTC’s argument that it had authority to promulgate the Rule will be an uphill battle against the plaintiff’s argument that the FTC overstepped.

Despite the FTC’s appeal, the FTC still cannot enforce the Rule against any employer. In the meantime, the FTC’s website cautions that the Texas district court’s decision does not prevent the FTC from addressing non-competes through case-by-case enforcement actions. Will the FTC’s zeal for banning or limiting the use of non-competes change in the upcoming months? Many predict the incoming administration will not pursue the appeal and/or may rescind the Rule. President-elect Donald Trump’s pick to run the FTC, Andrew Ferguson, who joined as a commissioner in April, has opposed much of the FTC’s rulemaking agenda under current Chair Lina Khan. Notably, Ferguson had dissented in the Rule to prohibit non-compete agreements, arguing the agency lacked clear authority from Congress. Also, Trump’s selection of antitrust lawyer, Mark Meador, to serve as a new Republican FTC commissioner, signals a likely political shift for the FTC, with Meador’s anticipated appointment creating a Republican majority on the FTC.

Employers and executives with questions about noncompetition agreements and other restrictive covenants should consult experienced counsel. Fellig Schwartz, LLC counsels businesses and management throughout New York and New Jersey on employment law compliance, hiring practices, workplace policies, and employment disputes.

About the Author

Audra Schwartz is a partner at Fellig Schwartz, LLC, where she advises businesses and management on employment law compliance, workplace policies, restrictive covenant disputes, compensation issues, and business litigation matters throughout New York and New Jersey. She counsels employers on hiring practices, wage and hour issues, employee separations, discrimination and retaliation claims, and employment agreements.

This article is for informational purposes only and does not constitute legal advice nor does it create an attorney client relationship. Employers with questions about New Jersey, New York and Federal employment laws should consult employment counsel.