White & Case Global Non-Compete Resource Center (NCRC)

On March 7, 2025, the FTC moved to stay its appeals to challenges against the Non-Compete Rule for 120 days, which the circuit courts granted. The FTC's motion cited the change in presidential administrations as well as FTC Chair Andrew Ferguson's public comments stating that the FTC may reconsider its defense of the Rule: "My view is that the Commission . . . basically needs to decide whether it's a good idea and it's in the public interest to continue defending this rule."

Although antitrust enforcers' concern for anticompetitive effects in labor markets has been escalating for some time (read our 2022 article about labor market developments here), the focus on perceived anticompetitive effects of employer/employee non-compete provisions has recently become much more acute, including across the past several U.S. administrations.

Table of Contents

• US FTC Joint Labor Task Force
• US FTC and DOJ's 2025 Antitrust Guidelines for Business Activities Affecting Workers
• April 2024 US FTC Rule Banning Non-Competes
  • What are the key features of the rule?
  • How does the final rule differ from the FTC's initial proposal?
  • If issued, what happens if you violate the rule?
  • What employers would be bound by the rule?
  • If it goes into effect, will the rule have any impact on NDAs and other restrictive covenants in employment contracts?
  • How would the rule impact non-competes entered as part of an M&A transaction?
  • Does the ban apply to non-competes in agreements between franchisors and franchisees?
  • How does the rule impact executives and executive compensation?
  • Does the rule ban garden leave?
  • What happens next with the rule, and when could it go into effect?
  • What is the status of legal challenges to the rule?
  • What happens now that the FTC's rule is barred?
• Recent Wave of US FTC Enforcement Actions Against Worker Non-Compete Agreements
• Changes at the State Level: New York and California
  • New York proposed non-compete ban
  • California strengthens its non-compete ban
    • What are the key features of California laws?
    • Do the California laws apply to all non-competes?
    • How does the California law differ from the FTC's rule?
• UK Proposes Stricter Approach to Non-Competes
  • What is the approach to non-competes in the UK?
  • What are the proposals?
  • Why no complete ban on non-competes?
  • What should employers do?
  • What is the proposed timetable?
• UK publishes research report on competition and market power in labor markets
  • What is the report on "Competition and market power in UK labor markets"?
  • What does the report say about non-compete clauses in UK employment contracts?
  • What are the implications of the Report?

US FTC's Joint Labor Task Force

On February 26, 2025, Federal Trade Commission Chair Andrew Ferguson issued a memorandum directing the heads of the FTC's Bureaus of Competition, Consumer Protection, and Economics as well as the Office of Policy Planning to form a Joint Labor Task Force.

The Task Force will prioritize the investigation and prosecution of deceptive, unfair, or anticompetitive conduct in the labor market and bring together expertise from across the agency to coordinate investigations and enforcement actions, such that this conduct is "fully prosecuted as a matter of consumer protection and competition law." Other Task Force responsibilities include identifying opportunities for advocacy on legislative or regulatory changes, promoting research and disseminating findings, and harmonizing investigation methods and procedures. With this directive, the FTC Chair expressly intends to "ensure that the FTC prioritizes labor issues in both its consumer-protection and competition matters."

The directive also called out a range of labor market issues that Chair Ferguson asserts fall under the FTC's jurisdiction and "trigger [the FTC's] mandates to fight unfair or deceptive practices and unfair methods of competition:"

• Non-competes which "impose unnecessary, onerous, and often lengthy restrictions on former employers' ability to take new jobs in the same industry after they leave their employment."
• Labor market termination penalties that "impos[e] unjustified fees when workers want to end their contracts."
• Employer-to-employer agreements that restrict labor mobility including no-poach, non-solicitation, and no-hire agreements, in addition to straight wage-fixing agreements.
• Labor market monopsonies, particularly in rural areas, where a firm uses "anticompetitive methods" to "create or maintain significant buyer power for labor."
• Collusion or unlawful coordination on DEI metrics that diminish competition for labor by excluding workers from jobs or professional-training schools based on race, sex, or sexual orientation.
• Harming gig economy workers through unfair or deceptive trade practices.
• Various deceptive practices based on false or misleading statements including deceptive job advertising that misrepresents salaries or perks to entice applicants, deceptive business opportunities which lure individuals into buying businesses with inflated or false claims about their worth and potential earnings, misleading franchise opportunities that lead workers or potential employers to invest savings in ways that never ultimately brings the benefits anticipated, and job scams including "online ‘task scams'" that trick individuals into performing tasks online, only to lose their money without receiving any compensation for completing the task.
• Harmful occupational licensing requirements, where employers or professional bodies impose unnecessary licensing restrictions which create an unwarranted barrier to entry or reduce labor mobility.

The Task Force will include 3 employees each from the FTC's Bureaus of Competition, Consumer Protection, and Economics and 1 employee from the Office of Policy Planning, who will meet at least monthly to discuss ongoing labor matters and provide quarterly reports on the status of those matters to Chair Ferguson.

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US FTC and DOJ's 2025 Antitrust Guidelines for Business Activities Affecting Workers

On January 16, 2025, days before President Trump's second inauguration, the DOJ and FTC jointly issued Antitrust Guidelines for Business Activities Affecting Workers. The Guidelines are here. These new Guidelines replaced the 2016 Antitrust Guidance for Human Resource Professionals and identify agreements and business practices that may draw antitrust scrutiny from the enforcers.

How the 2025 Guidelines will ultimately inform the enforcement priorities of President Trump's antitrust agencies is uncertain. Both Republican commissioners, including the new FTC Chair Andrew Ferguson, dissented from the issuance of the Guidelines, writing that "the Biden-Harris FTC announcing its views on how to comply with the antitrust laws in the future is a senseless waste of Commission resources. The Biden-Harris FTC has no future." The Republican Commissioners' dissenting statement is here. Gail Slater, Trump's nominee to head the DOJ's Antitrust Division, has not expressed her views on the Guidelines.

Still, the new Guidelines continued to emphasize certain principles first set forth in the 2016 Guidance, which was approved with the support of both the Democratic and Republican FTC Commissioners at the time. In particular, the 2025 Guidelines carried over the 2016 Guidance on these practices:

• No-poach and wage-fixing agreements could still incur civil or criminal liability. The 2025 Guidelines, like the 2016 Guidance, warned that criminal or civil liability may attach to agreements between competitors for workers (i) not to hire, solicit, or otherwise compete for current, former, or potential workers, or (ii) about workers' salaries or other terms of compensation, either at a specific level or within a range. The Guidelines emphasize that the regulators will focus on the substance of such agreements rather than their "precise form." For example, the Guidelines states that an agreement not to "cold call" workers would still be considered a no-poach agreement subject to liability, even if these firms can hire competitors' workers who apply for a position without first being solicited.
• Sharing sensitive employment information with competitors could invoke civil antitrust liability if this exchange is likely to have an anticompetitive effect. The new Guidelines again cautioned firms against sharing sensitive employment information with competitors, including information about workers' compensation, benefits, or employment contract terms. These information exchanges may constitute antitrust violations if they have or are likely to have an anticompetitive effect, regardless of whether that effect was intended. In line with the antitrust regulators' push against algorithmic collusion generally, the Guidelines emphasize that providing this information through an algorithm or a third-party software may also be unlawful.

The 2025 Guidelines also identified new practices that may constitute antitrust violations:

• Non-compete agreements may face antitrust scrutiny, even in the absence of the FTC's Rule. The new Guidelines suggest that the antitrust enforcers may prosecute non-compete agreements that harm competition as antitrust violations, even if the Non-Compete Rule does not survive its pending legal challenges. In particular, the Guidelines state that the agencies "may investigate and take action against non-competes and other restraints on worker mobility that limit competition," either through case-by-case FTC enforcement actions (such as those described below) or DOJ prosecutions.
• Franchise no-poach agreements may violate the antitrust laws. The 2025 Guidelines state that agreements between either franchisor and franchisees or franchisees of the same franchisor not to poach, hire, or solicit each other's employees may violate the antitrust laws. Such agreements may also be per se illegal, meaning that liability could attach to these agreements even if they create no anticompetitive effects.
• Expansive NDAs, training repayment provisions, non-solicitation agreements, and liquidated damages provisions may be unlawful if they undermine competition. The new Guidelines vaguely state that the agencies may "investigate and take action against" any "restrictive, exclusionary, or predatory employment conditions" that "harm labor market competition by preventing workers from seeking better, higher-paying jobs," depending on the "facts and circumstances." The Guidelines provide a range of examples:
  • Non-disclosure agreements that "span such a large scope of information that they function to prevent workers from seeking or accepting other work or starting a business after they leave their jobs," such as prohibiting disclosure of information "usable in" or that "relates to" an industry.
  • Training repayment agreement provisions may be anticompetitive "if they function to prevent a worker from working for another firm or starting a business."
  • Non-solicitation agreements that prohibit a worker from soliciting former clients of their employer can be anticompetitive "if they are so broad that they function to prevent a worker from seeking or accepting another job or starting a business."
  • Exit fee and liquidated damages provisions that require workers to pay a financial penalty for leaving their jobs may be anticompetitive "if they prevent workers from working for another firm or starting a business."
• Agreements that apply to independent contractors are subject to the same antitrust principles. The 2025 Guidelines clarify that agreements that affect the labor mobility of independent contractors are subject to the same antitrust scrutiny as those that affect formal employees.
• Misleading or false earnings claims can constitute antitrust violations. The new Guidelines also warn against making false or misleading claims about potential earnings that workers may realize as an antitrust violation, since "honest businesses are less able to fairly compete for workers.

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US FTC Rule Banning Non-Competes

On April 23, 2024, the U.S. Federal Trade Commission voted 3-2 to finalize and promulgate a rule banning most non-compete clauses in employer-employee contracts. The FTC published the final rule in the Federal Register on May 7, 2024 and it was originally slated to go into effect on September 4, 2024.

Legal challenges were swiftly lodged beginning just hours after the FTC’s vote approving the rule, and on August 20, 2024, a federal court set aside the Rule and prohibited the FTC from enforcing it. This order applies nationwide.

The rule was first proposed on January 5, 2023. (You can read the FTC's FAQs press statement here). The only major change from the proposed rule to the final rule is an additional exception allowing existing employer-employee non-competes for senior executives to remain in place.

On May 14, 2024, the FTC hosted a webinar discussing compliance with the Final Rule. The FTC covered the motivation behind the rule banning noncompetes, how to comply with the rule, who is covered by the rule, the definition of a noncompete, the effective date of the Final Rule, and alternatives to noncompetes. A recording of the webinar and the slides are available here.

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What you need to know:

• What are the key features of the rule as passed?
  • As of August 20, 2024, the FTC cannot enforce the rule as the result of a court order. This order remains subject to appeal.
  • The rule is broad. Once (and if) it goes into effect, the rule will prohibit employers from imposing non-competes on workers (including independent contractors and unpaid workers), and the ban will extend to all terms or conditions of employment that either "prohibit" a worker from, "penalize" a worker for, or "function to prevent" a worker from either seeking or accepting work in the United States with a different person, or operating a business in the United States, after their employment ends. For purposes of the rule, a term or condition of employment includes, but is not limited to, a contractual term or workplace policy, regardless of whether it is written or oral. § 910.1 of the Rule.
  • The rule requires employers to give notice that existing non-competes are no longer enforceable. In addition to preventing employers from entering into new non-compete agreements as of the effective date, the rule would also require employers to notify non-excepted employees that existing non-competes will not be, and cannot be, enforced. The rule also provides model language for this kind of notice. § 910.2(b) of the Rule.
  • There are two categories of employer-employee non-competes that are not covered (and thus not banned) by the rule.
    • Existing non-competes with Senior Executives. The rule will allow existing non-competes with senior executives to remain in force, but it bans new non-competes with senior executives.
      • The rule defines the term "senior executive" as a worker earning more than $151,164 who is in a "policy-making position."
      • Computing the compensation threshold may be more complicated than it looks. On the FTC’s May 14 webinar, the FTC indicated that the figure does not include board, lodging, payments for medical insurance, payments for life insurance, contributions to retirement plans, and other similar fringe benefits. Yet the Final Rule itself only cites provisions that comprehensively define board and lodging. It will likely take some time to define which costs may be included in the compensation threshold.
      • A "policy-making position" includes a firm's president, chief executive officer or the equivalent, any other officer with "policy-making authority," and any other natural person with "policy-making authority" similar to that of an officer's. "Policy-making authority" entails the "final authority to make policy decisions that control significant aspects of a business entity or common enterprise" but does not include "authority limited to advising or exerting influence over such policy decisions or having final authority to make policy decisions for only a subsidiary of or affiliate of a common enterprise." § 910.1 of the Rule.
        • Guidance that accompanies the Final Rule provides that many C-suite executives will likely be considered senior executives if these individuals have been making decisions that have a significant impact on the business as a whole. The FTC's May 14 webinar clarified this means that senior executives of a division or some other kind of sub-part of the whole business are not covered by the "senior executive" exception (and thus their existing non-competes would be voided under the rule).
    • Non-competes in "Sale of Business" agreements. Additionally, there is a narrow exception allowing non-competes in certain "sale-of-business" agreements. This exception includes bona fide sales of a business, of a person's ownership interest in a business, or of all or substantially all of a business's operating assets. § 910.3(a) of the Rule.
      • The proposed version of the rule had an exception to allow non-competes in the sale of a business where the employee owned 25% or more of the business – that provision has been removed. The final version's "sale of business" exception does not include a % ownership threshold.
  • It will supersede all contrary state laws. § 910.4(a) of the Rule.
     

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• If issued, what happens if you violate the rule?
  • The rule provides that the use of non-competes in violation of the rule is an "unfair method of competition" that violates Section 5 of the FTC Act. This means that the rule does not merely render covered employer-employee unenforceable, but rather, establishes that entering such agreements or attempting to enforce existing agreements contrary to the rule amounts to an unlawful act itself. Violations of the FTC Act can result in fines, penalties, and other injunctive relief.
• What employers would be bound by the rule?
  • Most employers will be subject to the rule when it goes into effect. Certain entities, however, are exempt from the FTC's jurisdiction under the FTC Act (pursuant to which the FTC purports to be issuing the rule), so it follows that those exempt entities should also be exempt from the rule. Those entities generally include certain financial institutions (banks, credit unions, savings and loans), sominitial-proposale non-profit organizations, and air carriers.
  • As explained below, however, the FTC and Department of Justice Antitrust Division have separately raised concerns about non-competes as an antitrust violation under Section 1 of the Sherman Act.
• If it goes into effect, will the rule have any impact on NDAs and other restrictive covenants in employment contracts?
  • Though the rule does not categorically prohibit NDAs, training repayment agreement provisions, or non-solicitation agreements, the FTC notes that such agreements could fall within the ban's ambit if they are "so broad and onerous" that they have "the same functional effect as a term or condition prohibiting or penalizing a worker from seeking or accepting other work or starting a business." An example of such an agreement, provided by the FTC, "may include an NDA that bars a worker from disclosing, in any future job, and information that is 'usable in' or 'relates to' the industry in which they work." See § 910.1.D.2.B of the Rule

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• How does the final rule differ from the FTC's initial proposal?
  • After announcing the Commission's proposed rule, the FTC invited public comments on its proposal through April 19, 2023. A total of 16,459 comments were lodged. Leading themes included (1) the adverse impact on the protection of intellectual property (IP) and the absence of any IP exception to the proposed non-compete ban; (2) the proposed rule's tendency to disincentivize investments in worker training; and (3) concerns that non-profit healthcare providers would be unfairly advantaged by the proposed rule since they are exempt from it.
  • Based on the differences between the FTC's initial proposal and the final version of the rule, the FTC seems to have taken stock of certain public concerns raised about the rule. For one, while the proposed rule required employers to proactively rescind existing non-competes that fell within the rule's reach, the final version has no formal rescission requirement and only obligates employers to provide notice that old non-competes no longer apply.
  • The final rule allows employers to maintain existing non-competes with senior executives. Still, employers will not be able to enter into new non-competes with senior executives.
  • The final rule's "sale-of-business" exception differs from the one originally formulated because it no longer includes a 25% ownership threshold. The FTC explained that it dropped the proposed requirement that an excepted non-compete bind only a "substantial" owner with at least 25% ownership stake after considering public comments which argued the threshold was too high because it failed to reflect the relatively low ownership interest held by many owners, members, and partners with significant goodwill in their business. See § 910.3.A.2 of the Rule.

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• How does the rule impact non-competes entered as part of an M&A transaction?
  • A "sale-of-business" exception allows a buyer in a bona fide sale of business transaction to enter into a non-compete with a seller, regardless of the size of the seller's interest in the target business.
• Does the ban apply to non-competes in agreements between franchisors and franchisees?
  • The rule does not categorically ban franchisor/franchisee non-competes. The definition of a "worker" subject to the non-compete ban "includes a natural person who works for a franchisee or franchisor," but explicitly excludes "a franchisee in the context of a franchisee-franchisor relationship." § 910.1 of the Rule. However, the FTC notes that "franchisor/franchisee non-competes may in some cases present concerns under section 5 similar to the concerns presented by non-competes between employers and workers," and that those non-competes "remain subject to State common law and Federal and State antitrust laws, including section 5 of the FTC Act." See § 910.3.D.6.C of the Rule.
• How would the rule impact executives and executive compensation?
  • While existing non-competes with senior executives can stay in place, the rule would ban non-competes for executives; there is no carve-out for new non-competes with C-suite executives, and no salary threshold. This may also impact the calculation of "parachute payments" for tax purposes.
• Does the rule ban garden leave?
  • Under the rule, garden leave may or may not be prohibited depending on how it is structured. The rule defines a "non-compete clause" as one that prevents the worker from seeking or accepting new employment "after the conclusion" of the current employment. Therefore, a garden leave provisions whereby the employee remains employed (i.e. with full salary and benefits) but is simply not allowed to access the business during the garden leave period should be permissible.

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• When will the rule go into effect?
  • At this time, it is unknown if the final rule will ever go into effect.
  • On August 20, 2024, a federal court in the Northern District of Texas set aside the rule and ordered that the FTC cannot enforce the rule.
• What is the status of legal challenges to the rule?
  • As a result of the August 20, 2024 decision in Ryan LLC, the FTC cannot enforce the Rule nationwide, against any employer. This decision is subject to appeal to the U.S. Court of Appeals for the Fifth Circuit which the FTC filed on October 18, 2024.
  • Each U.S. federal court in the three legal challenges to the FTC’s rule have now ruled on challengers’ requests to preliminarily enjoin the FTC’s rule: one court partially granted the preliminary injunction, another granted the preliminary injunction in full (which was requested as to the named plaintiff only), and the third court denied the preliminary injunction. This split creates fertile ground for appellate review.
  • Details on the three cases challenging the rule:
    • (1) Ryan LLC (Case No. 24-cv-986, Northern District of Texas):
      • On August 20, 2024, a federal court set aside the Rule and held that the FTC cannot enforce the Rule. This ruling applies nationwide. A copy of the order is available here.
        • On August 20, 2024, a federal court set aside the Rule and held that the FTC cannot enforce the Rule. This ruling applies nationwide.
        • The Northern District of Texas, in Ryan LLC v. Federal Trade Commission, granted the plaintiff’s motion for summary judgment, denied the FTC’s motion for summary judgment, and held that the Rule shall not be enforced.
        • The court held that the FTC exceeded its statutory authority in implementing the Rule.
          • Specifically, the court found that Congress did not grant the FTC the affirmative authority to make substantive rules regarding unfair methods of competition under either Section 6(g) or Section 18—the plain text of Section 6(g) does not expressly grant the authority, and the plain text of Section 18 concerns the FTC's ability to make rules regarding unfair or deceptive practices, not methods of competition.
          • The court also noted that the lack of statutory penalty for a violation of Section 6(g) demonstrates a lack of substantive rulemaking authority because substantive rules typically implicate penalties.
          • Finally, the court focused on the position of Section 6(g) in a list of investigative powers, concluding that Congress likely would not have chosen to grant substantial power at the end of a section that vests the FTC with power to "from time to time classify corporations."
          • The court further found that the history of the FTC Act further bolsters this conclusion. The court noted that for decades, the FTC disclaimed substantive rulemaking authority and that Congress did not grant affirmative authority in any amendments.
        • The Court also held that the Rule is arbitrary and capricious.
          • The court found that Rule, which categorically bans non-compete agreements, did not match the evidence or reasoning cited by the FTC. The court found that while the FTC considered state non-compete rules, those state rules were not as broad as the FTC's Rule. The court further found that the FTC's reasoning did not consider the benefits of non-compete agreements or narrower alternatives to the Rule.
        • Finally, the Court rejected the FTC’s argument that relief should be limited to the named plaintiffs, holding that the Administrative Procedure Act “does not contemplate party-specific relief,” and that the ruling would apply nationwide.
      • The FTC appealed to the U.S. Court of Appeals for the Fifth Circuit on October 18, 2024.
        • The FTC and the plaintiff have filed their opening appellate briefs, and the parties will proceed to oral argument sometime after the FTC's Reply Brief is filed on February 24.
        • The FTC's Appellant Brief principally argues that it has the statutory authority to issue rules preventing unfair methods of competition, including the Non-Compete Rule. The FTC contends that this authority flows from the FTC Act's plain text and is supported by Supreme Court precedent construing similar statutory language to confer similar authority in different regulatory contexts.
          • The Commission also argues that the Rule is not arbitrary and capricious because the rulemaking record evidences the FTC's exhaustive analysis of the economic literature and comments submitted during the rulemaking process, which supports its conclusion that non-competes are exploitative, coercive, and harm competitive conditions in labor, product, and service markets.
          • Finally, the FTC maintains that even if the district court were correct on the points of law discussed above, injunctive relief should have been limited to the named plaintiffs and not applied nationwide. The Commission contends that the APA does not require universal vacatur and that the district court should have considered the substantial equities, which, in the FTC's view, support upholding the Rule generally.
        • Ryan LLC's Appellee Brief maintains that the Fifth Circuit should affirm the district court's decision in its entirety.
        • Regardless of the outcome of the FTC's appeal, the Supreme Court's recent Loper Bright decision handed down on June 28, 2024 is expected to make an FTC appeal or ultimate success on the merits more challenging – Loper Bright overruled long-standing precedent under which courts afford deference to a federal agency's interpretation of its own power (known as "Chevron deference"). Without Chevron deference now, the FTC's legal arguments in support of its authority to promulgate the rule are on equal footing as the plaintiffs arguing that the FTC overstepped. See Loper Bright Enterprises v. Raimondo, No. 22-451 (2024).
      • On March 7, 2025, the FTC moved to stay its appeal for 120 days, citing changes in presidential administrations and FTC Chair Andrew Ferguson's public comments stating that the Commission would reconsider whether it wishes to continue defending the Rule. The Court granted the request, ordering that the case be stayed until July 12, 2025.
      • What happens next?
        • The FTC cannot enforce the Rule at this time. This applies nationwide.
        • Accordingly, the Rule did not go into effect on September 4, 2024.
        • The court had previously issued a Preliminary Injunction on July 3, 2024, that applied only to the named plaintiffs in the case. A copy of the preliminary injunction is available here.
    • (2) ATS Tree Services (Case No. 24-cv-1743, Eastern District of Pennsylvania):
      • On July 23, 2024, Judge Hodge in the Eastern District of Pennsylvania denied plaintiff ATS Tree Services’ motion for preliminary injunction and stay of the effective date of the FTC’s non-compete rule. A copy of the order is available here.
        • The court concluded that plaintiff failed to establish a reasonable likelihood of success on the merits and irreparable harm, and therefore the court did not address the additional prongs of the test for awarding a preliminary injunction.
        • The court did not mention the Ryan LLC case (as described above, on July 3, the judge in the Ryan LLC matter in the Northern District of Texas granted a limited preliminary injunction and stay).
        • On October 4, 2024, plaintiff voluntarily dismissed the action.
    • (3) Properties of the Villages (Case No. 24-cv-316, Middle District of Florida):
      • On August 14, 2024, the court granted plaintiff's motion for a preliminary injunction and stay of the effective date of the FTC's rule. The plaintiff had only requested relief as to that individual plaintiff—not a nationwide injunction (unlike the plaintiffs in Ryan LLC).
      • The court declined to issue a published opinion, in the interest of expediency. Instead, the court explained its reasoning at the hearing on the record, and attached the transcript to its Order. A copy of the order and transcript is available here.
      • The court held:
        • The plaintiff was unlikely to succeed on the merits of its argument that the FTC lacks the rulemaking authority it claimed. The court concluded that "Congress gave the FTC authority to 'prevent' unfair methods of competition, not just go after someone who already engaged in it, and that that [sic] authority resides in Section 6(g)." Tr. at 13:3–6, Properties of the Villages, Inc. v. FTC, No. 24-cv-316 (M.D. Fla. Aug. 15, 2024), ECF No. 59.
        • The plaintiff was unlikely to succeed on the merits of its constitutional argument that the FTC rule violates the commerce clause. Id. at 13:7–14.
        • The plaintiff is likely to succeed on the merits of its argument that the FTC's rule violates the major questions doctrine: "I find it substantially likely – and the plaintiffs have shown me this – that it presents a major question as defined by the Supreme Court" (id. at 19:20–24), and that "[section] 6(g) may not be the behemoth that the Commission says it is is evidenced by the fact that the Commission has never tried substantive rulemaking of this magnitude before this and had never even brought non-compete enforcement actions until it announced some consent decrees literally the day before it announced its Notice of Proposed Rulemaking" (id. at 20:12–17).
      • The court noted that it had read both the Ryan LLC and ATS Tree Services opinions; the court also cited Loper Bright.
      • On September 24, 2024, the FTC filed a notice of appeal to the Eleventh Circuit.
      • Briefing on this appeal will close on March 7 and will be followed by oral argument.
      • The FTC's Appellant Brief mainly argues that the district court erred by using major-questions principles to conclude that the Commission likely lacks authority to issue the Rule.
        • The FTC emphasized the district court's acknowledgment that the FTC Act's text conferred some substantive rulemaking authority on the Commission. The Commission contends that applying the major-questions doctrine to deviate from the statute's clear meaning was incorrect, as the doctrine is a statutory construction principle, not a substantive doctrine allowing the court to ignore clear statutory language.
        • Otherwise, the FTC argues that the plaintiff is not entitled to a preliminary injunction. The Commission asserts that the plaintiff cannot show irreparable harm from the Rule because its compliance costs, i.e., sending a notification to current and former employees subject to non-competes, are de minimis.  The Commission also contends that the balance of equities and public interest weigh against a preliminary injunction, given the "substantial negative effects" non-competes have on workers, small businesses, the economy, and the public.
      • Properties of the Villages' Appellee Brief principally asserts that the Non-Compete Rule is of the requisite economic and political significance to invoke the major questions doctrine and that the Rule is unlawful because the FTC Act provides no clear Congressional authorization for the Rule.
        • POV also argues that the tools of statutory interpretation and constitutional avoidance confirm the FTC lacks the authority to issue substantive unfair competition rules generally.
        • According to POV, the Commission's view of its statutory authority raises constitutional concerns under the (i) the nondelegation doctrine, as the Commission's interpretation of the FTC Act asserts "'unfettered discretion' to regulate the economy 'without any intelligible principle,'" and (ii) the Commerce Clause, since the Rule "reaches agreements like POV's, which operate on a purely intrastate labor market . . . involving the sale of stationary objects (homes) that do not travel in interstate commerce."
      • On March 7, 2025, the FTC moved to stay its appeal for 120 days, citing changes in presidential administrations and FTC Chair Andrew Ferguson's comments stating that the Commission would reconsider whether it wishes to continue defending the Rule. The Court granted the request, ordering that the case be stayed until July 21, 2025.
• What happens now that the FTC’s rule is barred?
  • Now that the FTC is permanently enjoined from enforcing the rule, (unless and until a successful FTC appeal), non-competes return to the status quo and are legal and enforceable on the same terms as they were before the FTC passed the non-compete rule.
  • Regardless, however, the FTC's rule has put non-competes in the spotlight and private plaintiffs are already attempting to use antitrust law to challenge non-competes and seek damages. See Order, Goforth et al v. Transform Holdco LLC et al., No. 23-cv-3167 (W.D. Mo. July 18, 2024), ECF No. 50 (denying defendant department store's motion to dismiss and finding that the plaintiffs, homewares stores in Missouri, had adequately alleged that defendants used noncompete agreements to maintain market share in violation of the Sherman Act). 
     

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Recent Wave of US FTC Enforcement Actions Against Worker Non-Compete Agreements

The FTC's initial proposed rule came within 24 hours of the FTC signaling its intention to achieve its anti-non-compete clause views through enforcement.

• On January 4, 2023, the FTC announced that it had filed suits—for the first time—to stop companies from enforcing non-compete restrictions. The FTC's press release is here.
  • The suits involved three companies with non-competes for a range of workers, including low-wage workers, which lasted for one to two years. As a result of the suits, the companies were ordered not to enforce the non-competes, as well as put other remedies into place, such as providing notice for the next 10 years to employees that they may freely seek any job following their employment.
• In these actions, the FTC sued under Section 5 of the FTC Act, which governs unfair methods of competition. The FTC argued that the non-competes harmed employees because they result in lower wages, lower salaries, and less favorable working conditions. The FTC also argued that the non-competes harmed new competitors in the glass food and beverage containers industry, noting that the non-competes would impede entry and expansion of new competitors in a concentrated market.
• On March 15, 2023, the FTC ordered another glass container company to drop non-compete restrictions on more than 300 workers across a variety of positions, again arguing that the non-competes harmed workers and competition in the industry. The FTC's press release is here.
• The FTC and Department of Labor (DOL) have signaled that more non-compete enforcement actions may be on the horizon. On August 30, 2023, the FTC and DOL signed a Memorandum of Understanding that sets out coordination in investigations and sharing of information between the DOL and FTC related to labor and competition issues. The Memorandum of Understanding is here.
  • According to the FTC, "the MOU identifies areas of mutual interest for the two agencies: collusive behavior; the use of business models designed to evade legal accountability, such as the misclassification of employees; illegal claims and disclosures about earnings and costs associated with work; the imposition of one-sided and restrictive contract provisions, such as non-compete and training repayment agreement provisions; the extent and impact of labor market concentration; and the impact of algorithmic decision-making on workers" (emphasis added). The FTC's press release is here.

Both the rulemaking and enforcement actions are in line with the FTC's November 2022 policy statement announcing that the FTC would invoke Section 5 to challenge conduct beyond that covered by the Sherman Act.

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Changes at the State Level: New York and California

State legislatures have also shown a growing interest in new proposals to ban or limit non-compete agreements.

New York renewed non-compete ban proposal. In June 2023, the New York State Legislature passed a bill that would have prohibited almost all new non-competes in New York and created a private right of action enabling workers to void their non-competes and recover up to $10,000 in liquidated damages, in addition to lost compensation, damages, and reasonable attorneys' fees and costs. Though the legislature passed the 2023 bill, Governor Kathy Hochul vetoed it, calling for a carveout to the ban for higher-wage workers. The bill's sponsor, State Senator Sean Ryan committed to proposing similar legislation in the future and made good on that promise when he introduced Senate Bill 4641 on February 10, 2025 which includes the carveout Governor Hochul called for.

What are the key features of New York's 2025 bill?

• The bill adds a new section to New York State Labor Law that would prohibit any employer from seeking, requiring, demanding, or accepting a non-compete agreement from any covered individual. Section 191-d(2).
• Covered individuals include "any person other than a highly compensated individual who, whether or not employed under a contract of employment, performs or has performed work or services for another person on such terms and conditions that they are, in relation to that other person, in a position of economic dependence on, and under an obligation to perform duties for, that other person." Section 191-d(1)(b). Accordingly, the law not only applies to formal employees but also may extend to independent contractors and others working under informal arrangements.
• If enacted into law, employers must conspicuously post a notice informing employees of the law's non-compete protections. New York's Department of Labor will develop and provide this notice for employers to distribute to their workforces. Section 191-d(9),
• The bill expressly exempts agreements that (1) establish "a fixed term of service," (2) prohibit disclosure of "trade secrets" and "confidential and proprietary client information," and (3) prohibit "solicitation of clients of the employer that the covered individual learned about during employment," provided that such agreement does not otherwise restrict competition. Section 191-d(4).

How does the Highly Compensated Individual exception work?

• Non-competes imposed on workers who are "compensated an average annualized rate of cash compensation determined by the income listed on the individual's three most recent W-2 statements and, where applicable, K-1 statements" equal to or greater than $500,000 are not banned under the law, so long as those workers are not health care professionals or non-management broadcast industry employees. Section 191-d(1)(c); see also Sections 191-d(1)(d), 191-d(2) (defining health care professionals separately from covered individuals and prohibiting non-competes against both); Section 191-d(5) (retaining restrictions on non-competes imposed against non-management broadcast industry employees).
• Highly Compensated Individuals subject to non-competes are entitled to salary payments for the period of the non-compete, which cannot apply for longer than a year. Section 191-d(7)(b). Additionally, these non-competes still must (1) be reasonable in time, geography, and scope, (2) not pose undue burden on the employee or harm to the public, and (3) be no more restrictive than necessary to protect an employer's legitimate business interests. Section 191-d(7)(a).
• The compensation level governing the exception under the bill will be adjusted on an annual basis beginning in 2027, based on any increase in the Consumer Price Index for all urban consumers for New York State. Section 191-d(1)(c).

Are there any other exceptions proposed under the bill?

• The bill also includes a sale-of-business exception such that non-competes entered in the sale of a business's goodwill or a majority ownership interest remain enforceable so long as (1) the seller owns at least 15% of the business, or (2) the seller is a partner of a partnership or a member of a LLC who owns at least 15% of that partnership or LLC. Section 191-d(6).

If enacted, what happens when you violate the law?

• The bill creates a private right of action such that a worker subject to a prohibited non-compete can sue to void its terms and receive payment for liquidated damages, lost compensation, damages, and reasonable attorneys' fees and costs. Section 191-d(3)(a). Additionally, the bill provides that courts "shall award liquidated damages" of not more than $10,000 "to every covered individual affected under this Section, in addition to any other remedies permitted by this Section." Section 191-d(3)(b).
• Such actions can be brought "within two years of the later of: (1) when the prohibited non-compete agreement was signed; (2) when the covered individual learns of the prohibited non-compete; (3) when the employment or contractual relationship is terminated; or (4) when the employer takes any step to enforce the non-compete agreement." Section 191-d(4)(a).

When would the law become effective?

• The law would become effective 30 days after being signed into law by Governor Kathy Hochul and will be applicable contracts entered into or modified on or after that date.

How does the NY bill differ from the FTC's proposed rule?

• New York's bill would not apply retroactively, unlike the FTC's proposed rule. New York's bill would only be applicable to contracts entered into or modified on or after its effective date, whereas the FTC's proposed rule would apply to pre-existing non-competes and require employers to proactively rescind their non-competes.
• Though the FTC's proposed rule would supersede inconsistent state law, the proposed rule also provides that any state law that affords a worker protection "greater than the protection provided" under the rule will not be pre-empted. (Proposed Rule § 910.4 is here.) Since the NY bill's damages provisions grant enhanced protections, it is likely to survive the proposed rule's implementation.

California strengthens its non-compete ban. California's new non-compete laws went into effect on January 1, 2024, bolstering the state's existing protections against non-competes. Though most non-compete clauses have been void in California since 1872, California's newly enacted AB-1076 and SB-699 create additional bars to enforcing non-competes in the state. SB-699, signed into law in September 2023, expands the reach of California's non-compete ban to contracts signed outside the state and creates a new private right of action for workers to sue employers who enter into or attempt to enforce a non-compete. AB-1076, enacted just a month later, codifies California Supreme Court precedent which made including a non-compete clause in an employment contract or requiring an employee to enter a non-compete unlawful unless an exception applied. AB-1076 also requires that California employers notify employees who are subject to unlawful non-competes that their non-competes are void by February 14, 2024.

• What are the key features of the California laws?
  • SB-699 makes most non-competes unenforceable in California, "regardless of where and when the contract was signed." Section 2(a). The law also prohibits employers and former employers from attempting to enforce a non-compete, even if "the employment was maintained outside of California." Section 2(b). The law could prevent out-of-state employers from enforcing non-competes against employees who leave to work at California companies.
  • Under SB-699, an employer that enters into a prohibited non-compete commits a civil violation that can be enforced through a new private right of action which enables a current, former, or prospective employee to sue for injunctive relief and actual damages as well as reasonable attorney's fees and costs. Section 2(e)(1)-(2).
  • AB-1076 codifies California Supreme Court precedent in Edwards v. Arthur Andersen LLP, 44 Cal.4th 937 (Cal. 2008), which clarified that any non-compete that falls outside the scope of California's preexisting exceptions is void, regardless of how narrowly tailored the non-compete is. Section 1.
  • AB-1076 also provides that California employers must notify both current employees and former employees employed after January 1, 2022 who are subject to unlawful non-competes that their non-competes are void. Section 3(b)(1). Written notice must be provided to these employees by February 14, 2024, and failure to provide such notice constitutes an act of unfair competition subject to a $2,500 penalty per violation. Section 2(b)(2), 2(c).
• Do the California laws apply to all non-competes?
  • No. California allows non-competes in the context of the sale of a business, the dissolution of a partnership, or upon the dissolution or termination of interests in a limited liability company, so those agreements will remain outside the scope of these laws. Cal. Bus. & Prof. Code Sections 16601, 16602, 16602.5.
• How does the California law differ from the FTC's rule?
  • The FTC’s rule covers less non-competes than California's ban. The FTC's rule contains the above-described exception for existing non-competes imposed on senior executives, while California's ban has no similar exception. Additionally, though California's ban also exempts certain sale-of-business agreements, this exception under California law has a narrower scope and only allows non-competes against business owners who sell (i) the goodwill of a business, (ii) all of their ownership in a business entity; or (iii) all or substantially all of the assets of a business together with the goodwill of that business. Cal. Bus. & Prof. Code Section 16601.

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UK Proposed Stricter Approach to Non-Competes

In a policy paper on "Smarter Regulation to Grow the Economy," the UK government has announced proposals to limit the duration of non-compete clauses in employment contracts to three months.

This proposal reflects the growing concern worldwide concerning the use of non-competes. As discussed above, earlier this year, the U.S. FTC took even more extreme action than the UK, by publishing a proposed rule to ban non-compete clauses completely.

• What is the approach to non-competes in the UK?
  • There are currently no statutory restrictions on non-compete provisions in the UK.
  • Under case law, non-competes will only be enforceable if they are no wider than reasonably necessary to protect a legitimate interest (e.g. protection of confidential information or customer contacts) and are not contrary to the public interest.
  • The UK courts have in the past enforced up to 12 month non-competes in employment contracts in certain sectors, particularly in case of non-competes imposed on founders or senior management. In other contexts, including partnership agreements and shareholder agreements, non-competes that apply for a longer duration have been enforced by the UK courts.
• What are the proposals?
  • The UK government proposes to limit the duration of post-termination non-compete clauses in employment contracts to three months.
  • The three month limit will only apply to non-competes in contracts of employment and the contracts of certain other workers who benefit from certain protections under UK employment law. The UK government does not propose to apply the limit to wider workplace contracts, such as partnership or shareholder agreements. This is on the basis that there are fundamental differences in the balance of bargaining power with these wider workplace contracts. Based on the consultation document, it appears that equity incentive documents, such as employee share option agreements, would be considered a wider workplace contract as well.
  • There are carve-outs. The proposal will not limit or interfere with the employer's use of:
    • non-solicitation clauses;
    • paid notice periods or gardening leave; or
    • confidentiality clauses.
  • The proposal also will not affect the restrictions on former UK public sector employees under the UK business appointment rules.
  • The proposal follows a consultation period between 4 December 2020 and 26 February 2021 that explored and ultimately rejected the following two alternatives:
    • the complete prohibition of post-termination non-compete clauses; and
    • making post-termination non-compete clauses permissible only when the employer provides compensation for the period of restraint.
  • The UK government estimates that there are around 5 million employees subject to non-compete clauses in Great Britain and that a typical duration is around 6 months.
  • Whilst recognising that non-compete clauses "can play an important role in protecting businesses who invest in their staff", the proposal claims that, "unnecessarily burdensome clauses have become a default part of too many employment contracts, including where they fulfil no purpose." The proposal states that non-compete clauses "can inhibit workers from looking for better paying roles, and limit the ability of businesses to compete and innovate".
  • The proposal's stated aims are to give "UK workers greater freedom to switch jobs, apply their skills elsewhere and even earn a pay rise."They also aim to "provide a boost to the wider UK economy, supporting employers to grow their businesses and increase productivity by widening the talent pool, and improving the quality of candidates they can hire."
• Why no complete ban on non-competes?
  • In contrast to the US FTC's proposal, the UK government has ruled out a complete ban of non-competes. Following a review of "available evidence, research, and literature", the UK government considers that the risks and potential for unintended consequences could outweigh the potential benefits of a complete ban. While the UK government recognises that a complete ban could have "a positive effect on competition and innovation", it considers that "there is some evidence to suggest that in certain circumstances, non-compete clauses can act as a mechanism to align incentives between workers and employers, and enable investments."
• What should employers do?
  • Employers should start to consider other ways they can protect their business interests once the proposed limit comes into force.
  • In the UK, the most robust way of protecting an employer's business interests in an employment contract of a senior employee who holds valuable trade secrets is a long notice period combined with an express garden leave clause. A 12 month notice period is fairly typical for a C-suite executive.
  • Where a long notice period is not appropriate or cannot be agreed, then employers may consider including non-competes in wider workplace contracts. In particular, if equity incentive documents will ultimately be considered a "wider workplace contract" under the final legislation, then granting an option or other equity interest which includes a carefully drafted (and longer) non-compete in its terms might well be a sensible and enforceable alternative.
• What is the proposed timetable?
  • The proposal states that the UK government intends to legislate "when parliamentary time allows." There is currently no clarity as to whether, if legislation does pass in this area, it will apply retroactively to existing employment contracts and contracts with workers and if so, whether pre-existing non-competes that apply for longer than 3 months will only be enforceable for 3 months after termination, or whether such non-competes will be unenforceable and void in their entirety.

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UK publishes research report on competition and market power in labor markets

On 25 January 2024, the UK's Competition and Markets Authority (the CMA) published a research report on competition and market power in labour markets.

What is the report on "Competition and market power in UK labor markets"?

• The Report is the first "flagship" research study published by the CMA's Microeconomics Unit, which was recently established to conduct economic research focussed on issues of competition, innovation, and productivity to support growth in the UK economy. The Microeconomics Unit has been set up as an independent and open-access centre of microeconomic research expertise for the UK government as a whole, and so the Report is aimed not just to inform the CMA's work, but also to be of wider policy interest.
• The Report examines employer market power and labor market concentration, the prevalence of restrictive covenants (including non-compete clauses), as well as changes in the labor market, including hybrid and flexible working and the gig economy, which features an increased amount of temporary positions and freelance work. The CMA is planning to use the findings to inform its current increasing scrutiny of potentially anti-competitive conduct in labor markets, as well as broader government and policy thinking.

What does the report say about non-compete clauses in UK employment contracts?

The Report finds evidence that post-termination non-compete clauses in employment contracts (preventing an employee from working at a competitor for a prescribed amount of time after they leave their current employer) are common in the UK.

According to the research:

• Non-compete clauses impact around:
  • 26% of workers in the UK;
  • 40% of UK workers in information and communication technologies and professional and scientific services; and
  • 20% of UK workers in retail, education, and food services.
• The most common duration of UK non-competes is 6 months, applied by 43% of employers who use non-competes. About 33% of employers who use non-competes include year-long clauses.

CMA chief executive Sarah Cardell questions specifically in her published speech (accompanying the Report) the high number of non-competes prevalent for the lowest-paid workers. She notes that, while non-competes are typically justified on the basis of enabling investment to develop workers (through training/sharing confidential information), "we might expect to see non-competes only in particular industries or groups of workers where this sort of investment is happening". The use of non-competes for rank and file workers at fast food chains throughout the U.S. has been a focus of enforcement actions by state enforcers and the U.S. DOJ especially since 2016.

What are the implications of the Report?

• The Report's findings (specifically the findings that well-functioning labor markets benefit workers and the economy more generally) will bolster the CMA's determination to ensure that businesses do not restrict competition between them in labor markets, through for example no-poach and wage-fixing agreements.
• Employee non-competes usually fall outside the scope of UK antitrust law, but are governed by employment law. The UK is currently planning to legislate to limit post-term non-competes to 3 months in the UK (as explained above). In her accompanying speech, Sarah Cardell states that the evidence in the Report "supports this direction of travel", and comments that "the widespread prevalence of non-competes across the economy could act as a barrier to job switching."
• Highlighting the possible need for further education, it is interesting that the Report notes that 40 per cent of respondents to the "Business Insights and Conditions Survey", with 250+ employees, stated that they were "not sure" what types of restrictive covenant they use in their employment contracts.

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