Our Newest Toothless Tiger: The FTC’s “Final Rule” Banning Non-Competes
Our Newest Toothless Tiger: The FTC’s “Final Rule” Banning Non-Competes
The FTC Votes Against Appealing Ryan, Which Ruled the FTC Lacked Authority for the Ban
The Federal Trade Commission’s (FTC) Rule banning non-competes is no longer a threat to businesses seeking to prevent their employees from transferring trade secrets and other confidential business information to competitors. In the Fall of 2024, U.S. District Judge Ada Brown for the Northern District of Texas found that the FTC lacked authority to create substantive rules pertaining to unfair methods of competition in Ryan, LLC v. FTC, No. 3:24-cv-00986. Now, in the Fall of 2025, the FTC itself voted 3-1 not to appeal Ryan, agreeing to end the nationwide ban on non-compete agreements, and recommitting itself to investigating and litigating specific cases.
When the FTC issued the Rule, current FTC Chairman Andrew N. Ferguson and Commissioner Melisa Holyoak dissented, thusly they issued a statement together following the FTC’s September 5, 2025 withdrawal of its notice of appeal in Ryan stating in essence: “we called it.” And, in fact, they had; Ferguson and Holyoak originally called out the Rule as having no authorization in the FTC Act, and as implicating the “Major Questions Doctrine,”[1] which were significant points of discussion in the Orders that followed ruling against enforcement.
The FTC’s Vote is Nothing New, NLRB Rescinded Restrictive Covenant Memos Months Ago
The FTC’s acceptance of the Ryan decision is directly parallel to developments at the National Labor Relations Board (NLRB), wherein early last year on Valentines Day, February 14, 2025, Acting General Counsel William B. Cowen rescinded two restrictive covenant-related memoranda authored by the previous general counsel, Jennifer Abruzzo. Specifically, Memorandum GC 25-05 rescinds: (1) “GC 23-08 Non-Compete Agreements that Violate the National Labor Relations Act [(NLRA)]” and (2) “GC 25-01 Remedying the Harmful Effects of Non-Compete and “Stay-or-Pay” Provisions that Violate the [NLRA].” Collectively, these memoranda were intended to delineate standards under which non-compete provisions are unlawful or permissible, and to provide a mechanism to rectify the financial harm of maintaining unlawful non-competes.
From Abruzzo’s point of view, non-compete agreements interfered with employees’ exercise of rights under Section 7 of the NLRA which protects employees’ right to organize, form, join or assist labor unions, and collectively bargain, and, except in limited circumstances, violated Section 8(a)(1) which makes it an unfair labor practice for an employer to interfere with, restrain, or coerce employees in the exercise of their rights. Cowen cited a very practical reason for rescinding Abruzzo’s directives, noting that “if [the NLRB] attempt[s] to accomplish everything, [it] risk[s] accomplishing nothing.” See Cowen Memorandum GC 25-05. Following this rescission, it is highly unlikely that the NLRB will launch an investigation simply because a business requires employees to sign non-compete agreements and seeks to enforce the contracts.
Forward-Looking, State Laws Still Exist!
But, employers should note that restrictive covenants continue to be governed by state law, as they traditionally have been. In Florida, that means focusing on the preexisting Florida Statute on restrictive covenants with its familiar time/area/scope restrictions, Fla. Stat. 542.335, and the CHOICE Act that went into effect on July 3, 2025 (also known as the “Contracts Honoring Opportunity, Investment, Confidentiality, and Economic Growth” Act). As RumbergerKirk recently shared in “Florida’s CHOICE Act Changes the Landscape for Restrictive Covenants,” the CHOICE Act is restricted to more highly paid employees, and adds new flavor to the pot by defining a new category of restrictive covenants, facilitating the enforcement process, and imposing pre-signing protective measures if employers desire the advantages of the CHOICE act.
The FTC has not disavowed investigations of businesses purportedly using restrictive covenants for no legitimate business purpose and simply to oppress employees and prevent fair competition. But with the executive branch of the Federal government adopting a less hostile approach to non-competes, we anticipate having to await the political pendulum’s next swing before any renewed effort to override state regulation of restrictive covenants.
[1] This Doctrine requires that a federal administrative agency “point to clear congressional authorization for the power it claims” when it “claims to have the power to issue rules of extraordinary economic and political significance.”
