On April 23, 2024, the Federal Trade Commission (“FTC”) passed a comprehensive ban on non-compete agreements (“FTC Rule”). A Texas federal court set aside the rule last August, issuing a nationwide injunction after finding the FTC exceeded its rulemaking authority, which we addressed in an earlier Legal Alert (FTC Rule Banning Non-Competes Ruled Unlawful – SGR Law). A Florida federal court also ruled against the FTC last August, issuing a limited, plaintiff-specific injunction in that case. As we noted in another Legal Alert (The FTC’s New Rule Bans Majority of Non-Compete Agreements – SGR Law), the FTC Rule would have required employers that have active non-compete agreements with their workers to notify such workers that the employer will not enforce such non-compete agreements.

On Friday, the FTC announced that it is voluntarily dropping its appeals in the two court cases. In a statement, FTC Chairman Andrew N. Ferguson said the new administration is choosing not to continue “tilting at windmills” by defending an indefensible rule.

The FTC will pivot to patrolling the markets for specific anticompetitive conduct to protect American workers. Ferguson illustrated this new focus by highlighting a settlement reached on Thursday, which barred a company from enforcing non-compete agreements that could have restricted 1,800 pet cremation employees from working in the industry for one year post-employment.

Moving forward, employers that broadly use non-compete agreements, regardless of employee title, compensation or ability to cause harm to the employer, may be susceptible to enforcement action. A tailored approach to the use of non-competes may stave off FTC investigation or action.

If you have any questions regarding the FTC’s new focus on specific conduct in the use of non-competes, please contact your Labor and Employment counsel or your Antitrust and Trade Regulation counsel at Smith, Gambrell & Russell, LLP.