On September 5, 2025, the Federal Trade Commission (FTC) made a dramatic policy reversal, voting 3-1 to dismiss its appeal and take steps to vacate a 2024 rule that would have banned noncompete agreements across the United States. This decision, announced late Friday afternoon just before a court-imposed deadline, marks the end—at least for now—of a signature regulatory effort championed by former FTC chair Lina Khan during the Biden administration, according to NPR and Reuters.
Noncompete agreements, for those unfamiliar, are employment contracts that prevent workers from taking jobs with a competitor or starting a similar business, typically within a set geographic area and for a certain period after leaving their employer. The FTC had estimated that as many as 30 million Americans—about one in five workers—are bound by such agreements. These contracts aren’t just for high-powered executives; they reach from minimum wage earners to CEOs, affecting a wide swath of the labor force.
The now-abandoned ban was finalized in April 2024, with the commission split along party lines. Khan and her allies argued that noncompetes suppress wages, stifle competition, and limit worker mobility. She contended that eliminating these agreements could boost wages by nearly $300 billion annually and lead to the creation of 8,500 new businesses each year. As Khan explained at the time, "Workers would be able to freely pursue new opportunities without the fear of being taken to court by their past employers."
The business community, however, quickly mobilized against the rule. Ryan LLC, a Dallas-based tax services firm, led a lawsuit challenging the FTC’s authority, with the influential U.S. Chamber of Commerce joining the fray. Their core argument? The FTC had overstepped its legal boundaries, and a nationwide ban would inflict irreparable harm by allowing employees to leave for competitors—potentially taking valuable skills and proprietary information with them. A federal judge in Texas sided with the plaintiffs, halting the ban nationwide before it ever took effect.
With the legal battle underway, the Trump administration—after taking office—signaled a shift in direction. In March 2025, the Justice Department requested a 120-day pause on the appeal, citing the change in leadership and the views of new FTC Chair Andrew Ferguson. By July, the administration asked for more time, eventually leading to the FTC’s Friday vote to withdraw the appeal entirely.
Ferguson, appointed by President Trump, has been consistent in his criticism of the broad ban. In a joint statement with Republican commissioner Melissa Holyoak, Ferguson minced no words: "The Rule's illegality was patently obvious. It preempted the laws of all fifty States, and actively displaced hundreds of existing laws across forty-six States." Ferguson had previously described the ban as "by far the most extraordinary assertion of authority in the Commission's history" and a violation of the Constitution, as reported by NPR.
Yet Ferguson’s position on noncompetes isn’t as clear-cut as some might assume. While he opposes a blanket prohibition, he’s acknowledged that noncompete agreements "can be pernicious" and "sometimes are abused to the effect of severely inhibiting workers' ability to make a living." Rather than a broad rule, Ferguson favors targeted enforcement—sending FTC investigators after noncompetes and no-poach agreements that violate the Sherman Act, the 1890 law that prohibits activities restraining competition. This approach, he told Fox Business earlier this year, is among his top priorities.
The FTC wasted no time illustrating this new strategy. On September 4, just a day before the vote to vacate the ban, the commission announced it had ordered the country’s largest pet cremation business to stop enforcing noncompete agreements with nearly 1,800 employees. The company had required even low-level workers to sign such contracts, which the FTC said unlawfully suppressed competition in the pet cremation market.
Still, not everyone is convinced that case-by-case enforcement will suffice. Rebecca Kelly Slaughter, the lone Democrat on the commission and the only dissenting vote, warned that this piecemeal approach leaves countless workers unprotected. "It 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," Slaughter said, as quoted by NPR. "Those people deserve protection, too." Slaughter, whom Trump had tried to remove earlier in the year, returned to her seat just days before the vote after a ruling from the D.C. Circuit Court of Appeals.
Elizabeth Wilkins, former chief of staff to Lina Khan and a key architect of the noncompete rule, echoed these concerns. Now president of the Roosevelt Institute, Wilkins pointed out that the FTC employs just 1,400 people to police the entire economy. "A clear and simple ban on noncompetes is, to my mind, the only way to truly protect workers," she argued. Wilkins noted that even in states where noncompetes are technically unenforceable, companies still use them, and workers often remain unaware of their rights.
The real-world impact of noncompetes is illustrated by stories like that of Rebecca Denton, a real estate transaction coordinator in Grand Junction, Colorado. Denton signed a noncompete in 2019 and, during the pandemic housing boom, found herself working grueling 16-hour days. When she wanted to quit, the contract meant she couldn’t work in her field across a three-state area for a year. "You feel trapped," Denton told NPR. "Shackled with a ball and chain." Ultimately, she quit and took lower-paying gig work, a decision she could afford but which she says many of her colleagues could not. Colorado’s 2022 law curtailing noncompetes brought her relief, and she hopes it pushes employers to treat workers better. "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."
Public sentiment appears to support Denton’s view. During the FTC’s rulemaking process, the agency received 26,000 public comments—nearly all in favor of a nationwide ban. The FTC has now invited the public to submit additional information about noncompete agreements, seeking to "better understand the scope, prevalence, and effects" of these contracts and to inform future enforcement actions.
For now, the legal and political fate of noncompetes remains unsettled. The Trump administration’s reversal means the courts won’t weigh in on whether the FTC has the authority to impose sweeping bans. Instead, the agency is poised to pursue a slower, case-by-case approach, leaving the broader debate—about worker rights, business interests, and the proper reach of federal regulation—far from resolved.
