What Happened to the FTC’s Noncompetes Rule?

The following article first appeared in the News & Insights section of Carmody Torrance Sandak Hennessey’s website. It is reposted here with permission.

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You may recall that in April 2024, the Federal Trade Commission finalized a rule that would have made most noncompete clauses between an employer and employee unenforceable.

The FTC concluded that noncompete clauses suppress wages, stifle workers’ mobility, harm competition and violate Section 5 of the Federal Trade Commission Act.

The final rule was scheduled to take effect on Sept. 4, 2024. However, on Aug. 20, 2024, a federal district court in Texas issued an order stopping the FTC from enforcing the rule.

The FTC initially appealed the ruling in October 2024 but then decided in September 2025 to dismiss its appeal. What does this mean for employers?

Three Key Takeaways for Employers

1. Employers still need to be wary of targeted enforcement actions by the FTC. That is, despite abandoning its effort to impose a broad rule prohibiting most noncompete clauses, the FTC has made it clear that enforcement of overly broad restrictive covenants remains a top priority, and the commission will continue enforcement on a case-by-case basis.

For example, in September 2025, the FTC successfully brought an enforcement action against Gateway Services, Inc. to stop the company from enforcing noncompete agreements against approximately 1,800 employees. The FTC noted that Gateway required nearly all employees to sign a noncompete agreement that generally prohibited them from working in the pet cremation service industry anywhere in the U.S. for one year after their employment ended.

2. Employers should be aware that an increasing number of states are passing laws limiting the enforceability of noncompete agreements. While Connecticut has not passed a law broadly banning noncompete agreements, state law limits the enforceability of non-compete agreements in certain professions such as for physicians, APRNs, physician assistants, security guards, broadcast employees, and home healthcare, companion, and homemaker service workers.

Further, numerous bills have been raised over the years in the Connecticut legislature—including during the most recent session—seeking to significantly limit the enforceability of noncompete agreements. It is likely that this issue will surface again in the next legislative session.  

3. Considering the increasing scrutiny of noncompete agreements, employers should review existing agreements and be sure that they are narrowly tailored to protect a legitimate business interest, such as trade secrets, and are reasonable in all aspects including geography, scope and duration. Employers should not blanketly require all employees to sign noncompete agreements. Instead, noncompete agreements should only be required for senior level or key employees with access to confidential information or important client relationships.

Employers should also consider having key employees sign non-solicitation covenants and confidentiality agreements in lieu of noncompete agreements that more broadly prevent employees from working for a competitor.  

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About the author: Nick Zaino is a partner with Carmody Torrance and a co-leader of the firm’s Business Services Group.