The Federal Trade Commission (FTC) has formally abandoned its effort to implement a nationwide prohibition on employer non-compete agreements, marking the end of one of the most closely watched regulatory battles in recent years. While the sweeping ban will not take effect, the agency has made clear that restrictive covenant practices remain firmly on its enforcement radar – particularly in the healthcare field.
The Rise and Fall of the FTC’s Non-Compete Rule
In April 2024, the FTC adopted a final rule that would have banned nearly all employer-employee non-compete clauses, potentially affecting an estimated 30 million workers across the U.S. The agency argued that these clauses stifled labor mobility, suppressed wages, and reduced innovation.
However, in August 2024, a federal court in Texas blocked the rule, holding that the FTC had exceeded its statutory authority by imposing such a sweeping restriction. Facing this judicial setback, the Commission initially appealed. But on September 5, 2025, the FTC voted 3–1 to dismiss its appeals and accept the federal court ruling, effectively ending the rulemaking effort.
A Shift Toward Targeted Enforcement
The Commission’s decision to drop the ban does not mean that non-competes are off the regulatory map entirely. Instead, the FTC has pivoted toward case-by-case enforcement using existing antitrust and consumer protection authority.
Just one day before withdrawing its appeal, the FTC announced a settlement with Gateway Services, a large pet cremation company, barring it from enforcing non-compete agreements against approximately 1,800 workers. The agency simultaneously launched a public Request for Information seeking input from employees who are currently bound by non-competes, employers experiencing hiring challenges due to rival non-compete restrictions, and other stakeholders with knowledge of how these agreements affect competition and mobility.
Most recently, on September 10, 2025, the FTC issued warning letters to several healthcare employers and staffing companies, urging them to review their employment practices to ensure that they do not unlawfully restrict worker mobility. Although the letters are not formal enforcement actions, they signal that the agency is actively scrutinizing employment agreements in the healthcare sector, where workforce mobility remains especially critical.
What This Means for Employers
The demise of the FTC’s nationwide rule does not mean that non-competes are beyond regulatory reach. Instead, the focus now turns to both state legislatures, which continue to enact their own restrictions, and the FTC, which has made clear that it will pursue targeted enforcement against practices it views as anticompetitive, especially in the healthcare field. Employers should expect heightened scrutiny on multiple fronts and should carefully review their restrictive covenant practices to ensure compliance with evolving state laws while also assessing potential exposure under federal antitrust standards.