Federal Trade Commission takes steps to vacate noncompete rule

Rule background

In January 2023, the FTC proposed a rule generally prohibiting employers from imposing noncompete agreements on their workers. In the 15 months that followed, the federal agency received more than 26,000 comments on the proposed rule, with more than 25,000 of those comments supporting the proposed ban. On April 23, 2024, the FTC narrowly voted to approve a final rule banning nearly all noncompete agreements.

The rule had been set to go into effect September 4, 2024, however, cases in two federal circuit courts stopped that from happening. The FTC appealed, and in March 2025 asked the two circuits to hold appeals for 120 days so the agency could reevaluate the rule being questioned in those cases.

The most recent steps indicate the FTC won’t pursue those appeals, thus abandoning the rule, at least for now.

The move was expected after FTC Chairperson Andrew Ferguson, who was appointed to the post by President Trump, criticized the rule.

Where employers stand now

While the FTC rule has been vacated at the federal level, employers must still comply with applicable state laws on noncompete agreements. These regulations vary, with some states prohibiting noncompete agreements altogether and others either restricting them to higher-paid workers or enforcing “reasonableness” tests.

Key to remember: The Federal Trade Commission has abandoned its rule banning almost all noncompete agreements. Employers must now look to state law for guidance on noncompete agreements.