Legislative Updates

By Diane J.  Geller

Partner, Fox Rothschild

I am regularly asked about the status of the Federal Trade Commission Rule that was issued last year regarding non-compete clauses. It had many businesses in a quandary about how to protect themselves when the Rule came into effect. That Rule ostensively would have banned almost all non-compete agreements in employee contracts. Its intent was to preempt state laws throughout the country and make non-compete clauses in employment contracts prohibited in most cases. The Rule would not have applied to sales of businesses or franchisor/franchisee agreements (but did apply to franchisee employees).

The Rule was to go into effect 120 days after its publication in April 2024. As a result, there were numerous lawsuits filed, and it was never enforced. On September 5, 2025, the Federal Trade Commission voted to dismiss its Circuit Court appeals for the Non-Compete Clause Rule, allowing the Rule to die. In a statement released by FTC Chair Andrew N. Ferguson and joined by Commissioner Melissa Holyoak, Chair Ferguson commented that "[t]he Rule's illegality was patently obvious."

While the news is good, the FTC in the same statement said that rather than fight to enforce an illegal rule the FTC "... choose to protect American workers by doing what Congress told us to do--patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers and taking bad actors to court."

In connection with the statement issued by Chair Ferguson and Commissioner Holyoak, Commissioner Mark Meador issued a concurring statement in which he proposed a framework for analyzing whether a non-compete agreement is reasonably necessary to achieve a legitimate business interest and narrowly tailored toward that end. In addition to other factors, he suggested whether there are less restrictive alternatives available to protect the employer from harm.

Commissioner Meador suggested that the following "may be more likely to present competitive concerns:

• Durations exceeding one to two years.

 • A geographic scope that exceeds the boundaries of the employer's current operations or the locations where the employee performed their regular duties.

 • Restrictions on an employee's ability to pursue work in industries or professions that are unrelated or only tangential to the company's core business or the employee's specific role."

The Commission is also soliciting comments from the public in a RFI regarding their experiences and concerns regarding non-compete agreement and their impact on the workforce.

Similarly, the Commission's RFI emphasized that employers are more likely to draw scrutiny if they "impose noncompete agreements as a matter of course, simply inserting them into employment contracts without due consideration."

On September 10, 2025, the FTC announced that its Chair, Andrew Ferguson sent letters to several large healthcare employers and staffing companies requesting them to submit their employment agreements for examination.

The template of the letter can be found here: Template for Noncompete Agreements.

On its website, the FTC indicated that they were focusing on healthcare employers and staffing companies that "...include unreasonable noncompete agreements in employment contracts for vital roles like nurses, physicians, and other medical professionals." Their stated concern is that the non-compete restrictions "...can unreasonably limit healthcare professionals' employment options and thereby limit patients' choices over who provides their medical care, including, critically, in rural areas where medical services are already stretched thin."

Diane J. Geller is a partner in the Labor & Employment Department at Fox Rothschild. She focuses her practice on representing clients in the staffing industry and helps clients stay compliant with the ever-changing federal and state regulations governing the workplace, as well as the daily challenges facing business owners. She can be reached at dgeller@foxrothschild.com.