The Federal Trade Commission (FTC)’s efforts to ban all non-compete agreements flopped under the Biden administration last year. So, non-compete agreements are still legal.
HOWEVER, on February 26, 2025, FTC’s Chairman Andrew Ferguson issued a memorandum establishing a Joint Labor Task Force to intensify efforts against deceptive, unfair, and anti-competitive labor practices affecting American workers, particularly focusing on non-compete agreements and other restrictive employment clauses. The Chairman stated “The FTC feels workers’ pain. The threats to American workers from unfair and deceptive practices, as well as anticompetitive conduct, are often overlapping and mutually reinforcing.”
FTC Will Scrutinize No-Poach, Non-Solicitation, and No-Hire Agreements
Number one on the list of the issues that FTC will focus on are employee no-poach, non-solicitation, or no-hire agreements, where employers agree to refrain from hiring each other’s employees. Courts have found these agreements can be so pernicious as to be a per se violation of the competition laws. Because the law is clear that such agreements constitute unfair competition companies do not usually put such agreements in writing. However, some companies still rely on a “gentlemen’s agreement” not to hire each other’s employees.
FTC Will Scrutinize Non-Compete Agreements
While the new FTC chairman criticized the agency’s prior attempts to ban all non-compete agreements, he has indicated that some non-compete agreements are too restrictive. Thus, FTC will address those on a case-by-case basis, recognizing that some non-compete agreements can impose unnecessary, onerous, and often lengthy restrictions on former employees’ ability to take new jobs in the same industry after they leave their employment.
FTC Will Scrutinize Labor-Contract Termination Penalties
In recent years, some industries have been relying heavily on training repayment agreement provisions (TARP) in order to restrict employee mobility. Other companies have use naked pay-me-if-you-leave provisions. FTC will be scrutinizing such provisions and other labor-contract termination penalties, through which employers can impede their workers from switching to competing employers by imposing unjustified fees when workers want to end their contracts.
Chairman Ferguson emphasized that these anti-competitive labor practices span multiple industries and reaffirmed the FTC’s commitment to protecting workers’ rights. Employees looking for non-compete agreement attorneys should be aware that the FTC will be actively investigating companies that impose these restrictive clauses.
Objectives of the FTC Joint Labor Task Force
The FTC Joint Labor Task Force aims to enhance enforcement efforts and protect employees from unfair labor practices, particularly unjust non-compete agreements. The key objectives include:
- Standardizing investigative procedures across FTC bureaus to ensure a unified approach in addressing labor market violations.
- Establishing an information-sharing framework to improve collaboration and leverage expertise for effective enforcement.
- Conducting research on deceptive labor practices and sharing findings with the public and stakeholders.
- Advocating for policy reforms that promote worker mobility and competition in labor markets.
- Educating employees on their rights and encouraging them to report deceptive employment practices, including unfair non-compete clauses, to the FTC.
- Coordinating investigations between the Bureau of Competition and Bureau of Consumer Protection, supported by economic analysis, to ensure comprehensive enforcement.
What This Means for Employees Dealing With Non-Compete Agreements
FTC will have broad authority to investigate non-compete and other restrictive covenants use by companies throughout the United States. The agency in the past has sued companies to stop them from using overly-restrictive covenants, including the following companies:
- Prudential Security, Inc. and Prudential Command, Inc., along with their two owners, required security guards to sign two-year non-compete agreements after leaving Prudential to work for a competing business within 100 miles of their job site, and that also contained $100,000 “liquidated damages” clause;
- O-I Glass, Inc., a manufacturer of glass food containers, banned workers “across a variety of positions” from working for, owning, or being involved in any other way with any business in the entire United States selling similar products or services for a period of one year after their employment with O-I Glass; and
- Ardagh Group S.A., also a manufacturer of glass food and beverage containers, banned workers “across a variety of positions” for a period of two years after leaving Ardagh from directly or indirectly performing “the same or substantially similar services” for any other business in the glass container industry in the United States, Canada, or Mexico.
As part of the settlement in each lawsuit, FTC required each company to (1) cease enforcing, threatening to enforce, or imposing non-compete provisions on workers; and (2) notify each affected employee that they were no longer covered by non-compete restrictions.
Final Thoughts
Employees who want to challenge their non-compete restrictions in court may be able to use FTC’s findings in similar circumstances to argue that their non-compete restrictions are unreasonable. While FTC’s activities are not binding on courts, they may serve as persuasive authority.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.