The Federal Trade Commission (FTC) has formally dismissed its appeal in Ryan, LLC v. FTC, thereby officially rescinding its 2024 Non-Compete Clause Rule, which would have established a broad prohibition on noncompete agreements in employment contracts. FTC Chairman Andrew N. Ferguson, joined by Commissioner Melissa Holyoak, issued a statement explaining that the FTC Act does not provide authority to the FTC to promulgate such a rule, and that “[t]he Rule’s illegality was patently obvious.”
While the rule is now officially off the table, the agency’s leadership emphasized that enforcement against abusive noncompete practices is far from over.
What this means for your business:
- The FTC is actively targeting abusive noncompete practices, especially those affecting lower-wage workers or containing overly broad restrictions.
- Healthcare employers are being closely monitored.
- Noncompetes that limit workforce mobility and reduce access to care (particularly in underserved areas) are priority enforcement targets.
Regarding the potentially illegal use of noncompete agreements in employment contracts, the FTC sent warning letters to several major healthcare employers and staffing firms on September 10. In the healthcare industry, where such limitations may restrict workforce mobility and lower patient access to care, the action reflects the FTC’s continued focus on labor market practices. Particularly in rural areas where access to healthcare is already limited, these limitations may limit patient choice.
FTC Recommendations:
- Review all your employment contracts, especially those noncompete and other restrictive clauses.
- Make sure any noncompete you have been reasonable in scope, time limits, and geographic coverage.
- Consider whether to use less restrictive alternatives first, like confidentiality agreements or non-solicitation clauses instead.
- Keep good records explaining the reasons for these restrictions and their necessity.
The FTC clarified that noncompete agreements are less likely to raise concerns when applied to high-level executives, such as directors, officers, and senior managers. These cases are typically viewed as more acceptable, particularly when the clauses are tied to equity grants or arise in the context of a business sale.