On Friday, September 5, 2025, the Federal Trade Commission (FTC) made a dramatic move that’s already sending ripples through America’s workforce and business community. In a 3-1 vote, the agency announced it would vacate its rule banning noncompete agreements—a reversal of what had been considered a landmark achievement under the Biden administration. The decision, coming just days before a court-imposed deadline, marks a pivotal moment for millions of American workers and the employers who rely on noncompete contracts to safeguard their business interests.
Noncompete agreements, for those unfamiliar, are contracts that prevent employees from joining rival firms or starting competing businesses within a certain time and geographic range after leaving their jobs. According to the FTC’s own estimates, about 30 million people—roughly one in five American workers, from fast food workers to CEOs—are bound by such agreements. For years, these contracts have been a flashpoint in debates over worker mobility, wage growth, and economic fairness.
The FTC’s original rule, championed by former chair Lina Khan and finalized in 2024, would have invalidated nearly all existing noncompetes and banned new ones except in rare cases. Khan argued that freeing workers from these restrictions could boost wages by $300 billion annually and help launch 8,500 new businesses each year. As she put it during the commission’s deliberations, workers would be able to “freely pursue new opportunities without the fear of being taken to court by their past employers.”
But the rule never got off the ground. According to NPR, the Dallas-based tax services firm Ryan LLC quickly filed suit, claiming the ban would cause “irreparable harm” by allowing employees to take valuable skills and proprietary information to competitors. The U.S. Chamber of Commerce joined the suit, warning that the FTC’s move was a vast overreach that would disrupt the economy. A federal judge in Texas sided with the challengers, ruling that the FTC had likely exceeded its authority and halting the ban nationwide.
The legal battle then moved to the 5th Circuit Court of Appeals. The Biden administration appealed the Texas decision in the fall of 2024. But after the 2024 election, the new Trump administration asked for a 120-day pause in March 2025, citing both the change in leadership and new FTC Chair Andrew Ferguson’s comments about reconsidering the rule. By July, the administration requested another 60-day extension, which was set to expire on September 8. Instead, the FTC announced on September 5 that it would abandon the appeal and take steps to formally vacate the rule.
Chairman Ferguson, along with Republican commissioner Melissa Holyoak, didn’t mince words in their joint statement: “The Rule’s illegality was patently obvious,” they wrote. “It preempted the laws of all fifty States, and actively displaced hundreds of existing laws across forty-six States.” Ferguson, who had voted against the rule when it was first proposed, called it “by far the most extraordinary assertion of authority in the Commission’s history” and a violation of the Constitution.
Yet, Ferguson’s position on noncompetes is more nuanced than it might appear. In a statement released Friday, he acknowledged, “Noncompete agreements can be pernicious. They can be, and sometimes are, abused to the effect of severely inhibiting workers’ ability to make a living.” Earlier this year, he told Fox Business that while he opposed a blanket ban, he wanted the FTC to focus on enforcing existing antitrust laws—specifically, the Sherman Act of 1890—against noncompetes and no-poach agreements that unreasonably restrict competition.
The FTC wasted no time illustrating this new approach. On September 4, the agency ordered the nation’s largest pet cremation business to stop enforcing noncompetes against its nearly 1,800 employees. The commission also issued a public call for information, inviting workers and employers alike to help “better understand the scope, prevalence, and effects of employer noncompete agreements,” as stated in an FTC press release. The hope is to gather data that could direct future enforcement actions.
But not everyone is convinced that targeted enforcement will be enough. Rebecca Kelly Slaughter, the commission’s lone Democrat and a vocal supporter of the original ban, cast the only dissenting vote. Recently reinstated to her seat after a legal tussle, Slaughter argued that case-by-case enforcement “does nothing to help the person working at the hair salon in Minnesota, or the engineer in Florida, or the fast food worker in Washington. Those people deserve protection, too.”
The public, it seems, largely agrees with Slaughter. During the rulemaking process, the FTC received 26,000 comments—almost all in support of a nationwide ban on noncompetes. Advocates like Elizabeth Wilkins, former chief of staff to Lina Khan and now president of the Roosevelt Institute, warn that the new enforcement strategy will fall short. “The FTC has something like 1,400 employees to police the entire economy—not just workers, not just labor markets, but everything,” Wilkins told NPR. She pointed out that even in states where noncompetes are unenforceable, companies still use them, often because workers don’t know their rights. “A clear and simple ban on noncompetes is, to my mind, the only way to truly protect workers.”
The personal toll of noncompetes is more than theoretical. In Grand Junction, Colorado, Rebecca Denton learned this firsthand. She signed a noncompete when she took a job as a transaction coordinator at a real estate firm in 2019. When the pandemic housing boom left her overworked and exhausted, she wanted to quit. But her contract barred her from similar work in a three-state area for a year. “You feel trapped,” Denton recalled. “Shackled with a ball and chain.” Ultimately, she left for lower-paying gig work, grateful she had the means to do so—a luxury many of her peers lacked. She cheered when Colorado passed a law in 2022 sharply limiting noncompetes and hopes other states will follow suit. “If you’re a good company, and you are paying your employees at scale or better, and you’re treating them well, you have nothing to fear of them leaving,” Denton said. “You don’t need a noncompete because they’re going to happily stay right there.”
With the FTC’s reversal, the future of noncompete agreements in the United States is far from settled. The debate now shifts to the states, the courts, and the halls of Congress—where the battle over worker mobility, business protection, and the proper scope of federal authority is sure to rage on.
