The following article first appeared in the News & Insights section of Carmody Torrance Sandak Hennessey’s website. It is reposted here with permission.
You may recall that in April 2024, the Federal Trade Commission finalized a rule that would have made most noncompete clauses between an employer and employee unenforceable.
The FTC concluded that noncompete clauses suppress wages, stifle workers’ mobility, harm competition and violate Section 5 of the Federal Trade Commission Act.
The final rule was scheduled to take effect on Sept. 4, 2024. However, on Aug. 20, 2024, a federal district court in Texas issued an order stopping the FTC from enforcing the rule.
The FTC initially appealed the ruling in October 2024 but then decided in September 2025 to dismiss its appeal. What does this mean for employers?
1. Employers still need to be wary of targeted enforcement actions by the FTC. That is, despite abandoning its effort to impose a broad rule prohibiting most noncompete clauses, the FTC has made it clear that enforcement of overly broad restrictive covenants remains a top priority, and the commission will continue enforcement on a case-by-case basis.
For example, in September 2025, the FTC successfully brought an enforcement action against Gateway Services, Inc. to stop the company from enforcing noncompete agreements against approximately 1,800 employees. The FTC noted that Gateway required nearly all employees to sign a noncompete agreement that generally prohibited...
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