As discussed previously, in May 2024, the Federal Trade Commission (FTC) finalized a regulation that would ban non-compete clauses for any employee who isn’t a senior executive.
Later, in August 2024, the proposed FTC rule was blocked by a federal district court judge’s decision. This means the FTC cannot enforce the rule.
The Current Administration and Non-Competes
The Federal Trade Commission (FTC) now is led by Chairman Andrew N. Ferguson, a Republican who assumed the role on January 20, 2025. In fact, there currently are only two commissioners, Chairman Ferguson and Republican Commissioner Melissa Holyoak. On March 18, 2025, President Trump dismissed two Democratic commissioners, Alvaro Bedoya and Rebecca Kelly Slaughter, and their terminations currently are the subject of lawsuits.
While the FTC hasn’t proposed another rule banning non-compete agreements, Chairman Ferguson announced plans for a Labor Markets Task Force in a recent memorandum. It’s a Task Force priority to investigate and prosecute deceptive, unfair, or anticompetitive labor market conduct. The memorandum identified non-compete agreements as a notable example of this conduct.
When describing non-compete agreements, the FTC’s memorandum says they’re something employers “can use to impose unnecessary, onerous, and often lengthy restrictions on former employees’ ability to take new jobs in the same industry after they leave their employment.” From this language, it seems the FTC isn’t taking the stance that all non-compete agreements should be outlawed. Rather, it seems the FTC is saying that non-compete clauses require investigation into the restrictions and the type of worker involved.
While nothing is certain, it’s possible the FTC may target employers that it perceives are misusing non-compete agreements through enforcement actions, penalties for imposing overly-broad restrictions, and other kinds of legal challenges. Generally, the detractors of non-compete agreements say that they suppress wages and stifle competition.
The Future of Non-Competes in the Federal System
Chairman Ferguson made it clear that he disagreed with the FTC’s decision to issue the non-compete rule in 2024, claiming that the FTC’s authority didn’t include this kind of rulemaking.
With the establishment of a Labor Markets Task Force, Ferguson now makes it apparent that he’s still interested in how non-compete agreements impact labor practices but indicates he may be taking a different approach in addressing them. However, it’s important to note that the FTC hasn’t withdrawn the rule or abandoned the court challenges. The challenge remains on appeal at the Fifth Circuit Court of Appeals.
New York State Non-Compete Law
Currently, there are no laws that ban non-competes in New York, but the topic long has been the subject of court cases throughout the State. Litigators know to advise their clients that non-compete provisions should be narrowly drawn in both geographic [how much land or area is covered by the provision] and temporal [for how much time does the restriction extend] scopes.
Recently, the New York State Senate introduced a bill (S4641) in February 2025 that would ban nearly all non-compete agreements. The bill purports to ban non-compete agreements between an employer and “any person other than a highly compensated individual” and defines a highly compensated individual as “any individual who is compensated at an average annualized rate of cash compensation. . . equivalent to or greater than $500,000 per year.” If the bill were to become law, employers will have 30 days to comply with the ban before the law goes into effect, as it is intended to apply to contracts entered into or modified on or after the effective date. The Senate bill indicates, however, that it would have no retroactive effect.
Interestingly, the Senate bill is sponsored by Western New York’s own Senator Sean M. Ryan. It’s simply too early to say whether the Senate bill will exit the Labor Committee where it resides today.
Practice Pointers on Non-Competes
- Remember that this area of the law is governed by legislators in both the nation’s Capitol and in Albany, NY, the seat of New York’s government.
- Stay informed. While the direction in which the FTC is heading remains uncertain, you must be ready if policies change at the State or federal level.
- Keep an eye on State law. States can implement their own laws banning or otherwise addressing non-compete agreements.
- Consider other options to protect your legitimate business interests. Non-solicitation and confidentiality provisions are two such options.
We’ll keep our eyes on quickly-changing laws in both the federal and New York State governments.
Feel free to call us with questions or concerns.
