President-elect Donald Trump recently said that current Federal Trade Commissioner Andrew Ferguson will be the next chair of the commission. He has also nominated Mark Meador to take over for outgoing Chairperson Lina Khan, creating a Republican majority on the FTC.
With these changes, it is probable that the FTC will end its attempts to ban noncompete agreements in employment contracts, Healio reported Jan. 13.
On Jan. 2, the Department of Justice, representing the FTC, filed a brief with the 5th Circuit Court of Appeals urging the court to overturn an August 2024 ruling that prevented a near-total ban on worker noncompete agreements from going into effect. The FTC initially appealed the decision in October 2024.
Without a federal ban, the regulation of noncompete agreements will fall to state and local levels. According to the report, only four states fully prohibit noncompetes, whereas 33 states and the District of Columbia have restrictions, which fall into four categories:
- Full bans: These prohibit noncompetes for employment contracts but may allow expectations for business sales or partnership dissolution.
- Income bans: These use a threshold in income to restrict noncompetes for higher earning employees.
- Other restrictions: These restrictions may impose industry-specific restrictions on noncompetes.
- No restrictions: States with no regulation in this category rely on case law or undefined standards such as "reasonableness" to regulate noncompetes.
If the national ban efforts end, states will continue to manage their own regulation of noncompete agreements. In states with noncompete bans, "employers should notify employees that their prior agreements are void and refrain from entering into or enforcing new ones," according to Healio. In states with other restrictions, employers must identify employees who may be covered or exempt and ensure compliance with any changes in state regulation.