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FTC Actions, State Bans, and the Future of Non-Compete Agreements

Is your talent strategy ready for a world without non-competes? Here’s what the FTC and states are doing next.
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Nearly one in five American workers is bound by a non-compete agreement – a clause that can limit their ability to change jobs or start a business. 

These agreements have long been standard in employment contracts, but is your organization prepared for a future where most non-competes are banned? 

In the past two years, the Federal Trade Commission (FTC) has moved aggressively to restrict non-compete clauses.

This article explains what business and HR decision-makers need to know about the FTC’s evolving stance and what it means for their talent strategy.

The Road to Non-Compete Reform

In January 2023, the FTC shocked U.S. employers by proposing a rule to ban non-compete agreements nationwide. 

The agency argued that this move would boost average worker earnings by an estimated $524 annually, reduce healthcare spending by as much as $194 billion over the next ten years, and create over 8,500 new businesses each year.

The proposal gathered an enormous response, with an overwhelming majority in support of outlawing non-competes. 

After a year of debate, the FTC finalized the rule in April 2024. It banned most new non-compete agreements and nullified existing ones for the majority of U.S. workers. 

Only existing non-competes for a narrow group of senior executives (less than 0.75% of the workforce) would remain in force. Employers were also required to inform affected employees that their non-compete clauses were no longer valid.

However, the FTC’s rule was blocked in court before it could take effect on September 4.

Industry groups filed legal challenges almost immediately, and judges in Texas and Florida issued rulings that put it on hold.

The FTC appealed, but those efforts have since been paused as the agency reconsiders its legal strategy.

New FTC Leadership, New Tactics

Following the termination of two Democrat commissioners in early 2025, the FTC’s regulatory focus has drastically changed with the appointment of Andrew Ferguson as Chair. As a vocal critic of regulatory overreach, Ferguson is expected to lead a more business-friendly FTC, but not necessarily a passive one.

That became clear in March 2025, when the agency launched a special task force on non-competes, signaling that enforcement would evolve but not disappear.

Key Priorities of the FTC’s New Task Force Include:

  • Investigations into deceptive, unfair, or anti-competitive labor-market practices (including non‑competes) 
  • Coordinate across FTC divisions, sharing information and research to uncover anti-competitive agreements
  • Advocate for legislative reforms and inform the public about these labor market issues

Under this initiative, the FTC is effectively doubling down on non-compete enforcement through case-by-case action. 

Even without a federal rule, companies remain at risk of investigation if their practices are deemed unfair or anti-competitive.

The FTC has made it clear that the court injunctions stopping the 2024 rule do not prevent them from addressing non-competes through enforcement of existing law.

Where States Stand on Non-Competes

While the FTC doesn’t label non-competes as outright illegal, it highlights how employers can use them to create excessive and prolonged barriers for employees trying to move within their field.

In response, many states have also introduced new legislation to tighten restrictions or clarify existing rules. 

As of 2025, 33 states and Washington, D.C. have placed limits on non-compete agreements, while four states – California, Minnesota, Oklahoma, and North Dakota – have banned them entirely.

Some states have introduced salary thresholds or industry-specific limits for enforceability. For example, Virginia limits non-competes to employees earning over about $73,000 per year. 

Here are other states that have implemented similar salary-based thresholds:

  • Washington, D.C. – $154,200
  • Oregon – $113,241
  • Washington – $120,559
  • Illinois – $75,000
  • Colorado – $123,750
  • Maine – $60,240
  • Maryland – $46,800
  • Rhode Island – $37,650
  • New Hampshire – $30,160

Practical Steps Employers Should Take

So, what should employers do now? 

Given the current regulatory environment, it’s time for businesses to reassess their use of non-compete clauses proactively.

Here’s where to start:

  • Audit existing agreements and flag clauses that may be too broad
  • Evaluate which roles truly need non-competes and which don’t
  • Use strong NDAs and IP protection instead of defaulting to non-competes
  • Stay up to date on state legislation and litigation trends
  • Consult legal counsel for compliance reviews and risk assessments

As the FTC pushes for higher standards of fairness and transparency in employment practices, employers must adapt.

Conclusion

In conclusion, non-compete agreements, as we’ve known them, are under unprecedented scrutiny. The coming months will test every employer’s readiness to adapt.

However, the businesses that lean into compliance and creative talent retention now will not only avoid the FTC’s investigations but also likely emerge as employers of choice in a more open, dynamic labor market.

Written by Ivana Radevska

Senior Content Writer at Shortlister

Sources

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