FTC Signals Tougher Scrutiny of Noncompetes

The Federal Trade Commission (FTC) reaffirmed it will pursue aggressive enforcement against noncompete agreements on a case-by-case basis rather than seek a nationwide ban.

In a recent public hearing, the agency’s leadership said that it will target overly broad, unjustified noncompetes, especially for lower-wage workers, and urged employers to review agreements to ensure they are narrowly tailored and tied to legitimate business interests.

FTC Chairman Andrew Ferguson reiterated his belief that noncompete agreements — contractual terms that block a worker from working for a competing employer, or starting a competing business, within a certain geographic area and period of time after the worker’s employment ends — can have anti-competitive effects. But he objected to the Biden administration’s 2024 rule that would have banned nearly all noncompete agreements nationwide as overreach. The rule was struck down by a federal court in August 2024.

Ferguson said the FTC would take an “education through enforcement” approach instead.

“The case-by-case approach will have effects beyond each individual case,” he said. “Once firms see that unjustified or overbroad noncompete agreements increase the risk of FTC enforcement, they will not enter into those agreements without giving serious consideration to whether those agreements are necessary to advance some legitimate business interest, and whether a less restrictive agreement could achieve that same end.”

He added that the agency will look for businesses executing “unjustified, overbroad, unfair, or anti-competitive noncompete agreements,” that do not advance a pro-competitive purpose, or else are not narrowly tailored to advance that pro-competitive purpose. The industries most burdened by noncompete agreements would also be a focus.

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Mark Woodward, an FTC attorney and assistant director of one of its anticompetitive practices divisions, said that health care has been a “particular focus” for the agency.

“Concerns about noncompetes may be especially significant in health care markets, where noncompete agreements may limit employment options for medical professionals and critically restrict patient choices for who provides their medical care,” he said.

The FTC issued warning letters to a series of health care employers in September 2025.

Employers should consider alternatives to noncompetes where possible, Woodward said.

“We often hear about motivations behind noncompetes that frankly could be addressed through alternative arrangements that are far less problematic from a competition perspective,” he said.

“Targeted nonsolicitation agreements may justifiably protect pro-competitive aims. And similarly, nondisclosure agreements can protect confidential company information. And fixed term contracts might be an alternative when there’s a desire to protect investments in worker training.”

Employers with overbroad agreements can expect enforcement activity up to and including litigation, he noted.

“The days of unreflective, unjustified, and anti-competitive noncompete agreements are over,” Ferguson said. “If a company wants to execute a noncompete agreement, they had best be prepared to defend it.”

Next Steps for Employers

Jonathan Crook, a partner in the Charlotte, N.C., office of Fisher Phillips, provided five steps to take now to ensure compliance:

• Don’t abandon all restrictive covenants. “While the FTC remains committed to rooting out abusive noncompete agreements, that is no reason to eliminate your restrictive covenants entirely,” Crook said. “The FTC recognizes that the appropriate use of restrictive covenants remains a legitimate, lawful means of protecting your business against unfair competition.”
• Reconsider noncompete use. Take stock of how you use these agreements, Crook said. “The FTC is focusing on employers who use overbroad and nonindividualized noncompetes, especially for employees whose duties do not justify such restrictions.”
• Reexamine noncompete scope. “Even if you only use noncompetes with employees whose duties justify them, you still need to ensure the substantive restrictions are no broader than necessary to protect a legitimate business interest,” Crook said. “Work with your legal counsel to identify those interests and narrowly tailor the covenants to appropriate behavioral, temporal, and geographic scopes.”
• Be aware of state law. Noncompete and nonsolicitation agreements are governed by a patchwork of state laws that change every year, with some states imposing steep civil penalties for noncompliance, he said.
• Protect trade secrets. “Make sure you have a strong trade secrets protection program in place, along with appropriate company policies and confidentiality provisions for all levels of employees,” Crook said.