Employee Non-Compete Agreements in 2025

Bottom line up front: The FTC’s nationwide non-compete ban is not coming into force; it was struck down in 2024, and as of early September 2025, the agency has dropped its appeals and is pivoting to case-by-case enforcement instead. That means U.S. employers are back to a patchwork of state rules — some states ban post-employment non-competes outright, others allow them with limits (pay thresholds, duration, scope), and courts continue to police overbreadth. Meanwhile, federal labor-law and antitrust signals have shifted: the NLRB’s 2023 anti-non-compete memoranda were rescinded in 2025, but DOJ/FTC antitrust guidance keeps a sharp focus on “no-poach” and similar agreements between employers.

The Federal Rollercoaster: from a near-ban to case-by-case enforcement

In April 2024, the Federal Trade Commission voted to finalize a rule that would have banned most new non-competes nationwide, with a narrow carve-out for existing agreements with “senior executives.” The agency framed non-competes as an “unfair method of competition” under Section 5 of the FTC Act after a multi-year record that included tens of thousands of public comments and extensive economic literature.

But federal courts quickly intervened. In Ryan LLC v. FTC, a Texas federal judge held in August 2024 that the Commission lacked authority to issue the sweeping rule and vacated it, following an earlier, narrower preliminary injunction in July 2024. Other courts weighed in as well, creating a confusing scene through late 2024.

Fast-forward to September 2025: the FTC, now under new leadership, voted to drop its appeals, effectively conceding that the 2024 rule will not take effect. Several outlets and industry trackers reported the move; the agency has since emphasized that it can still police unfair non-compete practices through targeted enforcement under Section 5. In fact, days before the appeals were dropped, the FTC announced a settlement barring a large employer from enforcing non-competes against 1,800 workers — signaling how it intends to proceed without a blanket rule.

What this means: there is no federal blanket ban in effect. Instead, the Commission is likely to bring case-specific actions against practices it views as coercive or anticompetitive (especially involving lower-wage workers or non-competes untethered to legitimate interests). Employers should expect enforcement risk even absent a universal rule.

The NLRB and Labor-Law Winds Have Shifted

In 2023, the NLRB’s General Counsel (then Jennifer Abruzzo) issued a memo asserting that many non-competes unlawfully restrict Section 7 rights under the National Labor Relations Act. That was rescinded on February 14, 2025, by the Acting General Counsel, who also withdrew a follow-on memo about “stay-or-pay” training repayment provisions. This doesn’t mean non-competes automatically pass NLRA muster — but it does mean the Board’s enforcement priorities have changed, and the sweeping position of the 2023 memo is no longer the agency’s guidance.

Takeaway: NLRA risk is lower than it looked in 2023, but overly broad restraints that chill protected activity (e.g., coordinating for improved working conditions) can still raise issues in fact-specific cases. 

Antitrust is Alive and Well — Especially for “No-Poach” and Wage-Fixing

Separate from the non-compete saga, antitrust enforcers remain focused on collusion affecting labor markets — particularly no-poach/no-hire and wage-fixing pacts between employers. The DOJ and FTC’s January 2025 joint Antitrust Guidelines for Business Activities Affecting Workers reaffirm that such agreements can violate the Sherman Act, with potential civil or even criminal exposure depending on the facts. While the guidance doesn’t opine on employee non-compete clauses directly, it underscores a climate where restraints impairing worker mobility face scrutiny.

Takeaway: even if a post-employment non-compete survives under state law, horizontal agreements between employers (formal or informal) to restrict recruiting or hiring can trigger federal antitrust liability. Train your HR and recruiting teams accordingly and avoid information-sharing or understandings with competitors about compensation or hiring.

The state-law patchwork: four bans, many limits, and rising thresholds

With the FTC rule sidelined, state law drives enforceability of non-competes. In brief:

• Outright bans: California, Oklahoma, North Dakota, and (for post-employment non-competes entered into after July 1, 2023) Minnesota have broad prohibitions — with narrow statutory exceptions (e.g., sale-of-business). 
• Threshold states: Others permit non-competes only for higher-earning workers and often cap duration, require notice, and demand reasonableness. Washington voids non-competes for workers under annually adjusted income thresholds and imposes other conditions; those thresholds rose again for 2025. Colorado’s 2022 overhaul (C.R.S. § 8-2-113) restricts non-competes to protection of trade secrets and ties enforceability to pay thresholds and written notice.
• Other notable regimes: Massachusetts’ Noncompetition Agreement Act (2018) requires garden leave or other specified consideration, generally caps duration at 12 months, and imposes multiple formalities — an approach that has continued to see court attention in 2024–2025.

For a 50-state snapshot, two frequently updated resources are the Economic Innovation Group’s interactive state tracker (policy overviews and pending bills) and the Beck Reed Riden 50-state chart (statute-by-statute summaries). Use them as starting points, then confirm the latest statutory text and local cases.

Practical implications of the patchwork:

• A clause enforceable in one state (say, a well-tailored 12-month restriction for a genuinely senior technical leader) might be void on its face in California or Minnesota.
• Multi-state employers need state-specific templates and choice-of-law/forum strategies that will survive scrutiny.
• Even where permitted, many states require advance notice, garden-leave-style pay, compensation thresholds, and tight tailoring to legitimate interests (trade secrets, customer goodwill, or unique training investments).

What’s not the same thing as a non-compete?

Many employers are moving away from traditional non-competes and relying more on narrowly tailored tools that are likelier to survive:

• NDAs / confidentiality agreements to protect trade secrets and sensitive information.
• Non-solicitation of customers (and, where permitted, of employees) drafted with precise definitions, geographies, and look-back periods.
• Garden leave arrangements where an executive remains employed (and paid) through a notice period, limiting competitive activity during that time.
• Repayment or training-cost provisions (TRAPs) that are reasonable and not punitive — bearing in mind recent scrutiny from labor agencies.

Each of these has its own legal limits, and some states treat employee non-solicits or no-recruit provisions functionally like non-competes if they’re broad enough to impede mobility. Draft with care and check local law.

Action checklist for employers (and counsel)

Map your footprint. Identify states where you hire or allow remote work. Tag them ban vs. threshold vs. reasonableness and track notice and format rules. The EIG state tracker and Beck Reed Riden chart are good high-level references, but they’re not a substitute for checking statutes and cases.

Segment your workforce. If you use restrictive covenants, reserve them for roles that truly implicate trade secrets or customer goodwill. For other roles, rely on NDAs and IP assignment plus tight non-solicitation provisions where lawful.

Tighten the drafting.

• Scope: Define “competitive business,” “customer,” and “confidential information” precisely.
• Time/geo: Keep durations short (6–12 months is common where allowed) and use geographies tied to real markets or accounts.
• Consideration & notices: Satisfy state-specific rules—e.g., written pre-offer notice, garden leave, or income thresholds.
  
  

 Mind federal overlays:

• Antitrust: Train HR/execs to avoid no-poach understandings and wage-fixing risks; consult the 2025 DOJ/FTC worker-market guidance.
• NLRB: Though the 2023 memo was rescinded in 2025, don’t use restrictive covenants to chill protected concerted activity.
  

Be ready for agency enforcement. The FTC has already demonstrated it will police abusive non-competes via targeted actions post-rule; low-wage or non-sensitive roles are especially risky.

Re-paper legacy agreements. In ban states (e.g., California/Minnesota) or where thresholds now exceed your employees’ pay, consider withdrawing or narrowing existing covenants and replacing them with compliant alternatives. For multi-state templates, create state-specific riders.

Litigation posture: If you must enforce a covenant, gather facts that show legitimate interests (e.g., recent exposure to trade secrets, close customer relationships) and tailor your requested relief to increase the chance a court will simply strike overly broad language rather than void the entire provision.

Final takeaways

• There is no national, across-the-board ban on non-competes in effect in 2025. The FTC’s 2024 rule was vacated, and the agency has abandoned its appeals, shifting to targeted enforcement.
• State law rules the day. Some states prohibit post-employment non-competes outright; many others allow them conditionally (pay thresholds, notice, duration, and tight tailoring). Expect yearly threshold updates (e.g., Washington) and continued legislative activity.
• Antitrust exposure is real for inter-employer agreements affecting labor markets; compliance programs should reflect the 2025 DOJ/FTC guidance.
• Good drafting beats wishful thinking. In some jurisdictions, an overbroad clause may be void; in other jurisdictions, courts may trim or rewrite the offending clause — but precision and necessity are still the best defenses.

DealStream, its authors, and affiliates do not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for, tax, legal, or accounting advice. You should consult your own tax, legal, and accounting advisors before engaging in any transaction.