FTC Dismisses Noncompete Ban Appeal

On Sept. 5, 2025, the Federal Trade Commission (FTC) voted to dismiss its appeals in two legal challenges of the FTC’s 2024 final rule to prohibit employers from using noncompete clauses with most employees. In 2024, the FTC appealed two separate court rulings regarding the noncompete ban, including one vacating the noncompete ban for all employers. Following the FTC’s dismissal of its appeals, the noncompete ban remains vacated for all employers.

Background

On May 7, 2024, the FTC published a final rule prohibiting employers from entering into or enforcing noncompete clauses with most employees and requiring employers to notify employees that their non-competes would not be enforced (subject to limited exceptions).

Currently, the enforceability of noncompete clauses is determined by state and local legislatures and courts. The FTC rule would have instead governed the enforceability of noncompete clauses at the federal level and superseded any less restrictive state laws or judicial interpretations. 

Highlights

• On May 7, 2024, the FTC issued a final rule that would ban virtually all non-competes effective Sept. 4, 2024.
• On Aug. 20, 2024, the District Court in Ryan blocked the FTC’s noncompete ban for all employers.
• On Sept. 5, 2025, the FTC voted to dismiss its appeals in Ryan and Properties of the Villages.
• Employers may continue to rely on state-level guidance regarding the enforceability of non-competes.

Court Rulings

In Ryan LLC v. FTC, the plaintiffs argued that the noncompete ban should be vacated because it exceeds the FTC’s statutory authority, is unconstitutional, and is the product of arbitrary and capricious decision-making. On Aug. 20, 2025, the U.S. District Court for the Northern District of Texas issued a final ruling in Ryan agreeing with the plaintiffs’ arguments and holding that “the FTC lacks statutory authority to promulgate” the noncompete ban and the ban “is arbitrary and capricious.” Under the ruling, the noncompete ban was permanently blocked for all employers nationwide.

In addition to the Ryan case, on Aug. 15, 2025, the U.S. District Court for the Middle District of Florida issued a preliminary injunction of the noncompete ban, which blocked the enforcement of the ban only with respect to the plaintiff in Properties of the Villages v. FTC.

The FTC filed appeals in the Ryan case on Oct. 18, 2024, and in the Properties of the Villages case on Sep. 24, 2024. However, on Sept. 5, 2025, the FTC voted to withdraw its appeals in both cases. Therefore, the noncompete ban will remain vacated in its entirety for all employers nationwide.

Employer Takeaways

While the FTC’s noncompete ban never took effect, employers were previously left with uncertainty as to whether the ban would ultimately take effect. Now that the FTC has withdrawn its appeals, employers have more certainty that the ban will not take effect, and employers may continue to rely on state-level guidance regarding the enforceability of non-competes. In addition, the FTC chairman stated that the agency will continue enforcement efforts against unlawful non-competes. Therefore, employers may wish to review existing noncompete agreements to ensure compliance with existing laws.

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