Legal Alert by Lamb McErlane Health Law attorneys Vasilios J. Kalogredis, Esq. and Sonal Parekh, Esq.

In a notable shift, the Federal Trade Commission (“FTC”) has announced that it will no longer defend the sweeping 2024 rule banning most noncompete agreements. Instead, the FTC is opting for a more targeted, case-by-case enforcement strategy.

As a quick refresher, in April 2024, the FTC promulgated a rule that would have barred nearly all employee noncompete agreements (with limited exceptions). However, the rule never fully went into effect, as courts enjoined its enforcement (e.g., in Texas and Florida) on the ground that the FTC lacked statutory authority to issue such a sweeping prohibition. On September 5, 2025, the FTC formally dropped its appeals in key cases and “acceded to vacatur” of the noncompete ban. With that step, the rule is no longer defensible, and legal authority now returns to traditional enforcement routes.

Although the blanket ban is off the table, the FTC has made clear that noncompete agreements remain very much within its enforcement sights. Specifically, the FTC has issued warning letters to healthcare and staffing firms, urging them to review whether their noncompetes are overly broad or unreasonable. It continues to assert authority under Section 5 of the FTC Act (governing unfair methods of competition) to challenge noncompetes that are unjustified or anticompetitive in specific contexts. In an attempt to help guide future enforcement, the Agency has also launched a Request for Information (“RFI”) seeking public input on the use, scope and harms of noncompete clauses. In at least one pending matter (a case against a pet-cremation company), the FTC is seeking a consent order mandating cessation of noncompete enforcement against 1,800 current workers.

In short, the FTC is trading a one-size-fits-all rule for a more case-dependent, fact-intensive approach and remains committed to prioritizing the enforcement against unreasonable noncompete agreements.

Key Takeaways for Employers (and Practitioners)

1. Don’t assume noncompetes are risk-free again. Dropping the rule doesn’t mean noncompetes are immune to challenge. Overly broad geographic scope, overly long durations, or applying noncompetes to low-level employees are all more likely to draw scrutiny under federal law.
2. State law still matters (often more). Many states, such as Pennsylvania, regulate enforceability of noncompetes via statutory limits or common-law reasonableness tests. Employers must still ensure compliance across jurisdictions.
3. Audit existing agreements now. Employers should review and calibrate their noncompete clauses (and perhaps non-solicitation covenants) to ensure they protect legitimate interests (e.g., trade secrets, client relationships, etc.) and are no more restrictive than necessary.
4. Beware of FTC complaints, marketplace complaints, and competitor complaints. The FTC could initiate investigations based on internal complaints, competitor challenges, or public comments in response to the RFI.
5. Document justification. If defending a noncompete, employers would benefit from creating contemporaneous records showing why the restriction is needed, its scope is reasonable, and less restrictive alternatives were considered.

The FTC’s shift underscores a broader tension in labor and antitrust policy: how to balance worker mobility and competitive markets against employers’ interests in protecting investment and confidential information. The Agency’s pivot reflects judicial limits on its rulemaking authority and a return to more classical enforcement modes.

It is likely there will be continued developments on this front such as further warning letters, individual enforcement actions, and perhaps even new rulemaking proposals. Employers and counsel should stay alert, proactively review their agreements, and be ready to respond to FTC inquiries. Employers and counsel in Pennsylvania should keep in mind how Pennsylvania’s restriction on noncompetes in the healthcare realm will continue to govern in the absence of the FTC’s noncompete ban.

If you have any questions or if we may be of further assistance regarding non-competes, compliance, or other health law matters, please feel free to contact Bill Kalogredis, Esq. or Sonal Parekh, Esq.

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*This alert is for educational purposes only and is not intended to be legal advice. Should you require legal advice on this topic, any health care matter, or have any questions or concerns, please contact Vasilios J. (Bill) Kalogredis, Esq. or Sonal Parekh, Esq.

Vasilios J. (Bill) Kalogredis, Esq. has been advising physicians, dentists, and other healthcare professionals and their businesses as to contractual, regulatory and transactional matters for over 50 years. He is Chairman of Lamb McErlane PC’s Health Law Department. Bill can be reached by email at bkalogredis@lambmcerlane.com or by phone at 610-701-4402.

Sonal Parekh, Esq., is an associate at Lamb McErlane PC who focuses on healthcare transactional matters and a broad range of healthcare regulatory-related issues on behalf of healthcare systems, physicians, dentists, and other healthcare providers, and is a pharmacist by education and training. Sonal can be reached by email at sparekh@lambmcerlane.com or by phone at 610-701-4416.