KHVPF Insight
Federal Non-Compete Crackdown Stalls at FTC and NLRB
As of mid-2025, federal efforts to rein in non-competes have largely fizzled. Despite headline-grabbing moves last year by the FTC and NLRB to limit non-competes and related restrictive covenants, those endeavors have been quickly disrupted by the courts and the change in presidential administration. And while the Supreme Court has recently restricted the ability of courts to impose broadly sweeping injunctions, it left an important carve-out that leaves in place earlier court orders blocking these regulations. So as of now, federal limits on non-competes remain in limbo, if not entirely dead in the water.
The FTC Rule Against Non-Competes and Subsequent Judicial Vacatur
On May 7, 2024, the FTC issued its “Non-Compete Clause Rule,” declaring that “it is an unfair method of competition for persons to, among other things, enter into non-compete clauses,” and stating that most existing non-competes would become void by its effective date of September 4, 2024. But before that final administrative rule could become effective, the United States Chamber of Commerce and certain regulated businesses brought a successful challenge in the Northern District of Texas that barred the FTC from enforcing the non-compete ban. That case (Ryan LLC v. Federal Trade Commission) challenged the FTC’s rulemaking under the Administrative Procedures Act, arguing that the FTC lacked statutory authority to create substantive rules to preclude unfair methods of competition and that the regulations were arbitrary and capricious. The court agreed, and applied its ruling beyond the named parties, reasoning that “the APA does not contemplate party-specific relief” but instead requires “nationwide effect.” The FTC initially appealed this decision to the U.S. Court of Appeals for the Fifth Circuit, but the appeal has since been voluntarily stayed for the foreseeable future. Thus, at present, the FTC’s final rule and regulations remain set aside and without any effect.
Importantly, the U.S. Supreme Court’s recent decision in Trump v. CASA, Inc.—which ruled against a nationwide injunction related to birthright citizenship—has no bearing on the court’s decision in Ryan LLC. In that decision, the Supreme Court specifically stated that it was not resolving “the distinct question whether the Administrative Procedure Act authorizes federal courts to vacate federal agency action.” In other words, at least for now, judicial vacatur of agency decisionmaking like in Ryan LLC remains valid, and the FTC’s “Non-Compete Clause Rule” is, for all intents and purposes, ineffectual.
The NLRB’s Current Treatment of Non-Competes
During President Biden’s administration, the NLRB took a pro-labor shift on the issue of non-competes. Former NLRB General Counsel Jennifer Abruzzo issued multiple memoranda addressing non-competes. The first memorandum, titled “Non-Compete Agreements that Violate the National Labor Relations Act,” stated that the “proffer, maintenance, and enforcement” of noncompete provisions in employment or severance agreements generally violate the NLRA. In a second memorandum, Abruzzo reaffirmed the NLRB’s hostility toward noncompete clauses and even expanded the focus to include so-called “stay-or-pay” agreements, i.e., those requiring an employee to remain with the company for a set time or else reimburse the employer for training costs, bonuses, and the like. Both memoranda advocated for robust remedies for workers harmed by these restrictive covenants.
Following these guidance documents, administrative law judges within the NLRB issued decisions interpreting noncompete clauses’ legality under the NLRA, with mixed results. For instance, in J.O. Mory, an ALJ determined that an employment agreement which “contains a non-compete clause . . . chills employees from engaging in union and other protected activities.” On the other hand, in NTT Data Americas, the ALJ rejected General Counsel Abruzzo’s theory—which it characterized as “novel”—and found that the employer’s noncompete and non-solicitation agreements did not violate the NLRA. Thus, ALJ decisions have come down on both sides of the issue, and there is no real clarity on the NLRB’s stance on non-competes.
Furthermore, General Counsel Abruzzo’s memoranda no longer hold any weight, even among the NLRB’s General Counsel’s office. On February 14, 2025, the new administration, under NLRB Acting General Counsel William B. Cowen, issued a memorandum rescinding both of General Counsel Abruzzo’s memoranda on non-competes.
Taken all together, then, the NLRB does not currently impose an explicit, general ban on noncompete agreements. And while it has flirted with the idea, such an interpretation has not been cemented in any binding rule or Board decision, with the NLRB’s current leadership pulling back the prior guidance. For now, the most current position is that there is no explicit NLRB ban on non-compete agreements, although past NLRB interpretations and decisions have cast serious doubt on overly broad non-competes as incompatible with workers’ Section 7 rights, at least in certain contexts.