FTC: We’ll deal with noncompetes on case-by-case basis, not via national ban

A nationwide ban on noncompete agreements is not in the works, at least not by the Federal Trade Commission (FTC), its leader said.

Rather, noncompete agreements will be subject to case-by-case analysis and employers will learn from “education through enforcement” by the FTC, said the leader of the fair market watchdog organization.

FTC Chair Andrew N. Ferguson and Commissioner Mark R. Meador offered their analyses as part of “Moving Forward: Protecting Workers from Anticompetitive Noncompete Agreements,” an online webinar hosted by the Federal Trade Commission (FTC) on Jan. 27. Both spoke at length touching on the history of noncompetes, recent FTC actions, current policy and their future approaches to the work contracts.

Ferguson defined noncompete agreements as a contract between an employer and a worker where the worker promises not to work for a competitor or operate his own competing business. Typically the agreements are limited to periods of time or geographic areas.

The issue looms large in health care employment. Physicians, other clinicians and workers in other sectors have gone public with their experiences of employers using strict, broad agreements to stifle their abilities to find work. During the same webinar, two physicians described how noncompetes tilted health care employers’ power to govern how they made career decisions by limiting opportunities by place and time.

Who has the power?

Congress could impose a national regulation over noncompete agreements, but for decades has opted not to, Ferguson said. The FTC tried in 2024, but that was a power grab outside the FTC authority granted by Congress, he said.

The nation generally has relied on case-by-case enforcement by the FTC, court rulings and state regulations to govern noncompetes, and that will continue.

“The power Congress has given us over unfair methods of complicated competition is the case-by-case enforcement approach,” Ferguson said. “That is how we have police anticompetitive conduct from our inception. Those who want alphabet soup bureaucrats to impose a nationwide ban on noncompete agreements when Congress has refused to do so, should take their arguments to Congress, not to me.”

Businesses are on notice

Since seeking additional public comment last year, the FTC has filed complaints against two firms with restrictive employment agreements that were anticompetitive, Ferguson said.

“In each case, we found that these agreements not only harmed employees by denying them the ability to seek better job opportunities, but also harmed competing companies and consumers who would benefit from the greater mobility of workers,” he said. “This is an important point. Unlawful noncompete agreements are anticompetitive, not just for workers trying to sell their labor, but for rival companies and for consumers as well.”

Other businesses will get the message: Don’t make employees enter noncompetes without considering if the agreements are necessary to advance a legitimate business interest, and if a less restrictive agreement could achieve the same end.

“Basically, it's education through enforcement by bringing enforcement actions against specific businesses executing unjustified, overbroad, unfair or anticompetitive, noncompete agreements,” Ferguson said. “Others will take notice and adjust their agreements accordingly.”

Affordability in the economy

Meador also endorsed case-by-case review instead of a one-size-fits-all regulation over noncompetes and his commentary focused on affordability for consumers. Many government efforts about affordability focus on supply side — lowering the costs of food, health care, housing and more. Those are important, but the regulators also must address affordability as a demand side issue.

“And by that, I mean that you can't have a healthy economy if nobody gets paid enough to buy anything,” Meador said. “A healthy economy requires healthy consumer demand, and so it follows from this that American workers deserve to be paid high enough wages to meet the needs of the moment.”

There are appropriate uses for noncompetes, but Meador called for “common sense,” and offered anecdotes about the mushrooming use of noncompetes for jobs such as nurses, bartenders and interns.

Nurses and bartenders develop unique skill sets that require some mastery, but are not so uniquely specialized that employers are disadvantaged if the workers choose to labor elsewhere, Meador said.

“Many of these non competes, to be clear, would likely be unenforceable in court,” Meador said. “As such, they're scare tactics. They are scare tactics designed to take advantage of working people who don't have the money to get a lawyer to tell them this. That is exploitation. It is predatory and it is morally wrong. Is an abusive tactic that makes life less affordable for the people who form the backbone of this country.”