Labor & Employment Law Daily Wrap Up, EXPERT INSIGHTS—Early Signs Point to Pullback on Prior Administration's Moves to Curtail Noncompetes Per Se, (Apr 17, 2025)

Law Firms Mentioned:Duane Morris

By Lawrence Pockers, Shannon Hampton Sutherland and Katie Kovalsky of Duane Morris LLP

During the Biden administration, the Federal Trade Commission (FTC) sought to ban virtually all noncompetes per se, and the general counsel of the National Labor Relations Board (NLRB) also took strong positions against them. Now however, early signs from the Trump administration indicate some change in the federal government's strategies for policing noncompetes.

The FTC Rule Banning Noncompetes Remains on Pause

The FTC's final rule, announced on April 23, 2024, and adopted in a 3-2 party-line vote, would have rendered noncompete clauses in most employment contracts unenforceable as an unfair method of competition under the FTC Act. Employers quickly challenged the noncompete rule. In August 2024, a Texas federal court invalidated the rule and blocked its enforcement nationwide, and the FTC appealed that order to the Fifth Circuit. A Florida federal judge also issued an order in August 2024 blocking enforcement of the rule as to the parties in that case, and the FTC likewise appealed that decision to the Eleventh Circuit.

On March 7, 2025, the FTC asked the circuit courts to stay both appeals for 120 days, to allow the FTC time to "reconsider its defense of the challenged rule." The FTC cited public comments by new FTC Chairman Andrew Ferguson: "My view is that the Commission … basically needs to decide whether it's a good idea [and] it's in the public interest to continue defending this rule." Prior to his appointment as chairman, then-member Ferguson released a dissenting statement against the rule, arguing that the FTC lacked rulemaking authority under Section 6(g) to broadly regulate all private employment contracts in the United States. Both courts granted the FTC's requests for stay, giving the FTC until approximately mid-July to determine its next steps.

FTC Launches a Joint Labor Task Force

Although Chairman Ferguson may not support a blanket FTC rule banning noncompetes, his February 26, 2025, "Directive Regarding Labor Markets Task Force" highlights his view that the FTC's authority includes protecting Americans in their roles as both consumers and workers, and that the use of noncompete, no-poach, nonsolicitation and no-hire agreements, among other practices, falls within the FTC's jurisdiction. Exactly how the FTC will exercise this jurisdiction is yet to be seen, but under his leadership, the FTC may prosecute individual abusive uses of such agreements and support additional policies aimed at protecting workers.

Chairman Ferguson recently directed that the FTC launch a Joint Labor Task Force, composed of the FTC's Bureau of Competition, Bureau of Consumer Protection, Bureau of Economics and Office of Policy Planning, to "prioritize rooting out and prosecuting deceptive, unfair, and anticompetitive labor-market practices that harm American workers." The task force's responsibilities include prioritizing the investigation and prosecution of deceptive, unfair or anticompetitive conduct in labor markets; creating protocols for sharing best practices across FTC bureaus and offices for uncovering and investigating offending conduct; promoting research on deceptive, unfair or anticompetitive labor markets; engaging in public outreach to workers; and identifying opportunities to advocate for legislative and regulatory changes to remove barriers to labor market competition. More clarity on the current FTC approach to restrictive covenants will come when the Joint Labor Task Force begins making recommendations.

NLRB General Counsel Rescinds Memos Critical of Noncompetes

As we reported in our earlier Alert, on February 14, 2025, NLRB General Counsel William Cowen rescinded several memos issued by former NLRB General Counsel Jennifer Abruzzo, including two related to restrictive covenants: (1) General Counsel Memorandum 23-08, "Non-Compete Agreements that Violate the National Labor Relations Act (NLRA)," and (2) General Counsel Memorandum 25-01, "Remedying the Harmful Effects of Non-Compete and Stay-or-Pay Provisions that Violate the NLRA." In the rescinded memos, former General Counsel Abruzzo took the position that, except in limited circumstances, noncompete agreements and many training repayment agreements with nonsupervisory/nonmanagement employees violate the NLRA. Abruzzo's theory was that workers who believe that they will be restricted in finding new employment are less likely to advocate for improved terms and conditions at their current jobs. General Counsel Cowen's rescission of these memos, without an indication that further guidance in this area will be forthcoming, indicates a shift in the NLRB's priorities and approach to restrictive covenants.

What This Means for Employers

Early signs from the Trump administration indicate that the NLRB and FTC may not take blanket, one-size-fits all positions against post-employment restrictive covenants, per se. Individual enforcement actions, however, may continue in circumstances deemed by the agencies to be egregious. Meanwhile, the states continue to have varied laws affecting post-employment restrictive covenants with which employers must comply.

Employers should continue to work with experienced noncompete counsel to ensure compliance with existing law, while anticipating the impact of future changes.

For More Information

If you have any questions about this Alert, please contact Lawrence H. Pockers, Shannon Hampton Sutherland, Katie Kovalsky, any of the attorneys in our Trade Secrets and Non-Compete Group or the attorney in the firm with whom you are regularly in contact.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm'sfull disclaimer.

Lawrence Pockers

Shannon Hampton Sutherland

Katie Kovalsky

Duane Morris LLP

30 S. 17th Street

Philadelphia, PA 19103-4196 United States

Tel.: +1 215 9791000

E-mail: solutions@duanemorris.com

URL: www.duanemorris.com/

Attorneys: Lawrence Pockers, Shannon Hampton Sutherland and Katie Kovalsky (Duane Morris).

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