Update: FTC Abandons Non-Compete Rule and Simultaneously Initiates Targeted FTC Noncompete Enforcement Action

On September 4, 2025, the US Federal Trade Commission filed an enforcement action and simultaneous proposed settlement against a pet cremation company for abuse of employer-employee post-termination non-competes as an anticompetitive practice in violation of Section 5 of the FTC Act. Today, the day after filing the enforcement action, the FTC voluntarily dismissed its appeal of the court rulings prohibiting the FTC from enforcing its Non-Compete Rule, which attempted to ban all employer-employee non-competes. The enforcement action signals continued focus on non-competes even though the ban is no longer on the table.

Key Takeaways: By filing an administrative complaint (and a proposed Consent Order for public comment) against Gateway Services, Inc. and Gateway US Holdings, Inc. on September 4, 2025, the FTC has shown that, even under the new administration, protecting workers from what it views to be the unfair use of post-employment non-compete agreements remains a priority. Prior to the FTC's formal dismissal of its appeal, FTC Chair Andrew Ferguson had publicly expressed his view that the FTC overreached its legal authority by promulgating its 2023 FTC Non-Compete Rule prohibiting all non-competes, but stated that the FTC will enforce existing antitrust laws "vigorously against those who demand their employees enter into noncompete agreements so pernicious and so onerous as to make them anticompetitive" and will do so using the Sherman Act's pre-existing "rule of reason" analysis (which is, generally, a case-specific reasonableness test).

The FTC's actions against Gateway demonstrate that employers that use non-compete agreements across the organization, regardless of the employee's title, compensation level or ability to cause harm to the employer, may be susceptible to enforcement action. Such employers should consider evaluating their practices (even if such practices are compliant with applicable state and local laws). Adopting a more tailored approach to the use of non-competes could potentially stave off FTC investigation or action, and the myriad of challenges that would bring, ranging from facing a potential company-wide investigation (which could include document collections and depositions), to reputational harm, and, if necessary, implementing a company-wide burdensome consent order and resulting compliance requirements. The FTC specifically carved out from the enforcement action the use of non-compete agreements for directors, officers and senior employees in connection with the grant of equity or equity-based awards, non-competes entered into in connection with the sale of a business by the pre-existing equity holders of such business, as well as for certain individuals where non-compete agreements are justified to protect legitimate business interests (such as equity holders, very senior managers, or others who have "more unique access to competitively sensitive information").

FTC v. Gateway: In Depth: On September 4, 2025, the FTC charged Gateway, the largest "by far" pet cremation services company operating in the United States (with over 1,900 employees), with violating Section 5 of the FTC Act, asserting that Gateway's policy, in place since 2019, of requiring all newly hired employees (other than in California) to sign 12-month post-employment non-compete agreements is an unfair method of competition. Given this policy, nearly 1,800 of Gateway's employees were subject to post-employment non-competes, including hourly workers, regardless of skill level or job duties.

The FTC's proposed Consent Order requires Gateway to immediately, among other things:

• cease entering into or enforcing in the United States (including by requiring the payment of fees or penalties) the post-employment non-compete agreements to which current employees, prospective employees and former employees employed within the prior year, other than a specified (and non-public) list of individuals to whom the Consent Order does not apply (such employees, the "Covered Employees"), are or could be subject, other than (the following "Non-Prohibited Non-Competes"):
  • post-employment non-compete agreements entered into with Gateway's directors, officers or senior employees in connection with the grant of equity or equity-based interests in Gateway, or
  • non-compete agreements entered into in connection with the sale of a business with individuals who hold pre-existing equity interests in the business being sold;
• cease communicating to any Covered Employee or any prospective or current employer of a Covered Employee, that the Covered Employee is subject to a post-employment non-compete other than Non-Prohibited Non-Competes; and
• stop prohibiting any Covered Employee from soliciting current or prospective customers other than those with whom, in the last year of the Covered Employee's employment with Gateway, such Covered Employee had direct contact or to whom the Covered Employee personally provided services.

The FTC's proposed Consent Order also requires Gateway to deliver and post specific notices to each Covered Employee regarding the inapplicability of post-employment non-competes, submit to the FTC acknowledgements from directors, officers, and human resources employees (including those who become directors, officers or human resources employees in the next ten years) of the complaint and Consent Order, and file regular compliance reports with the FTC extending into the future for ten years.

The FTC imposed on Gateway obligations to maintain records for proving compliance and to inform the FTC of certain changes to Gateway and corporate transactions involving Gateway and required Gateway to permit access to the FTC of its facilities, directors, officers and employees.

What Happens Next: The public has 30 days to submit comments on the proposed Consent Order. In light of comments, the FTC can choose to finalize the Order, modify it, or withdraw it.

More information on current issues surrounding employer-employee non-competes can be found on the White & Case Non-Compete Resource Center ("NCRC").

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