One Year Later, FTC’s Noncompete Ban Remains on Life Support, as FTC Mulls Pulling the Plug

As readers of this blog will recall, last April, the Federal Trade Commission (FTC) voted along party lines to finalize a rule (the Noncompete Ban) that would have banned the vast majority of employee noncompete agreements across the country. Shortly after the FTC’s vote, the Noncompete Ban was challenged in three separate lawsuits: first in Texas, then in Pennsylvania, and then in a third case in Florida. The court in Pennsylvania ruled for the FTC, finding the Noncompete Ban lawful and supported by the FTC’s administrative record. By contrast, the courts in Texas and Florida ruled against the FTC, both finding the Noncompete Ban to be unlawful (albeit on somewhat different grounds). And, importantly, the Texas court issued a broad, universal order, preventing the Noncompete Ban from taking effect nationwide.

In the closing months of the Biden Administration, the FTC appealed the Texas and Florida decisions to the Fifth and Eleventh Circuit Courts of Appeals, respectively. Since Inauguration Day, however, the Trump administration has brought rapid changes to the makeup and direction of the FTC. Within hours of taking office, President Trump appointed a Republican, Andrew Ferguson, to serve as FTC Chair. Two weeks later, the Democratic former FTC Chair, Lina Khan, resigned her seat at the FTC, leaving the FTC with two Republican Commissioners and two Democratic Commissioners. Then, on March 18, President Trump fired the two remaining Democrats — a controversial move that is being challenged in court. Most recently, on April 10, President Trump’s nominee to serve as the third Republican Commissioner, Mark Meador, was confirmed by the Senate, giving the Republicans control of the FTC.

All the while, the fate of the Noncompete Ban still remains with the Fifth and Eleventh Circuits. Given the rapid changes to the FTC, on March 7, the FTC asked the two courts to hold the appeals “in abeyance” for 120 days, to allow the FTC to reassess whether to continue defending the Noncompete Ban. Both courts granted these requests, ordering the FTC to submit a “status report” by July 10 (in the Fifth Circuit) and July 18 (in the Eleventh Circuit) to advise on how the FTC intends to move forward.

Given that both now-Chair Ferguson and his Republican colleague, Commissioner Melissa Holyoke, opposed the vote last year on the Noncompete Ban on grounds that they found it unlawful, it seems like only a matter of time before the FTC’s defense of the Noncompete Ban is officially abandoned. Given the uncertainty over President Trump’s termination of the two Democratic Commissioners, there was speculation that Chair Ferguson was waiting for the Senate to confirm Mark Meador as the third Republican Commissioner before moving forward with an official vote to abandon the appeal. Now that Commissioner Meador has been confirmed, such a vote could happen in the near future, in which case the Noncompete Ban will officially be dead.

Even if the FTC pulls the plug on the Noncompete Ban, Chair Ferguson has made clear that the FTC intends to continue its efforts to promote competition in labor markets. In February, in announcing the appointment of Daniel Guarnera as Director of the FTC’s Bureau of Competition, Chair Ferguson cited Guarnera’s “experience using the antitrust laws to promote competition in labor and healthcare markets—two of my top priorities.” Chair Ferguson added that Guarnera would help “fulfill President Trump’s promise … to protect the interests of American workers.” Later that same month, Chair Ferguson directed the formation of a “Labor Markets Task Force” to “prioritize rooting out and prosecuting unfair labor-market practices that harm American workers.” In addition to noncompete agreements, the Labor Markets Task Force is charged with investigating and challenging conduct like “no poach” agreements, “wage-fixing” agreements, unfair or deceptive trade practices that harm gig economy workers, and false or deceptive job advertisements. Interestingly, Chair Ferguson also directed the Labor Markets Task Force to investigate and challenge labor practices that implicate more traditionally conservative issues such as “harmful occupational licensing requirements” and “collusion or unlawful coordination on DEI metrics.” Therefore, even if the Noncompete Ban seems unlikely to survive in its current form, you can expect the FTC to continue policing labor practices on a case-by-case basis as vigorously as ever.