As previously discussed, on May 7, 2024, the Federal Trade Commission (“FTC”) issued its final rule on non-compete clauses (the “Rule”), banning most of them as “unfair methods of competition.” Even before its effective date of September 4, 2024, the Rule faced significant enforcement challenges.
In July 2024, a district judge in Texas vacated the Rule on grounds that the FTC lacked authority to issue it and that the Rule was arbitrary and capricious under the Administrative Procedure Act. One month later, another district judge in Florida blocked the application of the Rule as to the parties in that case.
While the FTC appealed both rulings, the Trump administration has frozen the appeals. After designating Andrew N. Ferguson—a member of the FTC who voted against the Rule—as the new chairman of the FTC on the first day of his second term, President Trump and the federal government filed motions to stay proceedings of the appeals for 120 days in the U.S. Court of Appeals for the Fifth and Eleventh Circuit.
In support of their motions, the government cited comments from Chairman Ferguson: “My view is that the Commission . . . basically needs to decide whether it’s a good idea [and if] it’s in the public interest to continue defending this rule. . . . I’m going to be presenting at some point [to] my colleagues the decision about whether to continue defending this Rule.”
On March 12, 2025, the Fifth Circuit granted the government’s motion. Shortly thereafter, on March 20, 2025, the Eleventh Circuit granted the motion. Accordingly, the FTC must submit status reports to the Fifth and Eleventh Circuit courts on July 10 and July 18, 2025, respectively.
Despite the pause in proceedings, Chairman Ferguson has created a Joint Labor Task Force which aims to “prioritize rooting out and prosecuting deceptive, unfair, and anticompetitive labor-market practices that harm American workers.”
In any case, it appears that the Trump administration is willing to, at least, push back on the Rule and employ a more pro-business approach to anti-compete clauses than the previous Biden administration. As we await the results of the FTC’s status reports, employees and employers alike should stay tuned for more updates.
