The approach of the U.S. Federal Trade Commission to policing noncompete clauses has shifted, from a broad nationwide ban to focused enforcement against unlawful noncompetes. In April 2024, the FTC introduced a rule intended to ban most noncompetes across the U.S. The rule faced several legal challenges, and, in August 2024, a U.S. District Court held the rule was unlawful. On Sept. 5, 2025, the FTC withdrew its appeal of the court ruling, effectively abandoning its nationwide ban. Statements accompanying the FTC’s decision to withdraw emphasized that the FTC lacked authority for a sweeping rule but would still police illegal noncompetes through enforcement of Section 5 of the Federal Trade Commission Act of 1914.
On Sept. 4, 2025, the FTC launched a public inquiry through its joint labor task force. The stated purpose of the inquiry was to gather data to “understand the scope, prevalence, and effects of employer noncompete agreements, as well as to gather information to inform possible future enforcement actions [emphasis added].” The task force is encouraging members of the public—including employees currently and previously restricted by noncompete agreements—as well as employers facing hiring difficulties due to competitors’ noncompete agreements to share information about the use of noncompete agreements. As a result of this information collection effort, employers may find themselves in the agency’s crosshairs.
The FTC is also distributing letters to many large employers and staffing firms in the health care sector notifying them that the FTC has information that “suggests that many health care employers and staffing companies include noncompete agreements in employment contracts that may unreasonably limit employment options for vital roles like nurses, physicians, and other medical professionals.” The FTC states that it intends to focus resources on enforcing Section 5 of the FTC act against unlawful noncompetes, particularly in the health care sector. Although the FTC acknowledges that narrowly tailored noncompetes can serve a valid purpose in certain circumstances, the agency encourages companies to conduct comprehensive reviews of their noncompetes and restrictive covenants to ensure they are justified and not overbroad or otherwise unfair or anticompetitive.
In light of the FTC’s activities, staffing firms should ensure their noncompetes pass legal scrutiny under both federal and state laws. Noncompete clauses are particularly likely to be struck down in states like California, Minnesota, North Dakota, and Oklahoma, which have some the most restrictive rules regarding the use of noncompetes.