The Federal Trade Commission (FTC) recently announced a shift in its enforcement priorities, placing a stronger emphasis on rooting out and prosecuting unfair labor practices that harm American workers, including the use of non-compete agreements.
In a memorandum dated February 26, 2025, FTC Chairman Andrew N. Ferguson outlined the formation of a Joint Labor Task Force aimed at addressing various anticompetitive and unfair practices in labor markets.
Just over a week later, on March 7, the FTC filed motions to pause its appeals in lawsuits challenging its rule to ban non-compete agreements nationwide, while the commission considers its next steps.
These actions suggest a pivot away from the FTC’s approach to policing non-compete agreements through rulemaking and toward enforcing fair labor practices through investigation and prosecution.
The FTC's Shifting Approach to Non-Competes
This continued focus on non-compete agreements is particularly notable given recent regulatory history:
- Previous Rule Banning Non-Competes Nationwide: Last year, the FTC voted 3-2 to publish the “Non-Compete Clause Rule” to ban employers from entering into non-compete clauses with workers. Current FTC Chairman Ferguson was one of two dissenting votes.
- Legal Challenges: Within hours of the FTC vote, the rule was challenged in federal courts in Texas, Florida, and Pennsylvania. On August 20, 2024, a federal judge in Texas ruled that the FTC's non-compete ban is unlawful and set aside the rule nationwide. The FTC appealed this decision but recently paused that appeal in a motion filed on March 7, 2025.
- Change in Strategy: On March 7, the FTC filed motions pausing the appeals process in two pending federal court cases challenging the non-compete ban. Both motions refer to Commissioner Ferguson’s statement that he believes the commission should reconsider its defense of the proposed rule. While the FTC is reassessing its rulemaking power, the Joint Task Force memo makes it clear that Ferguson still considers non-compete agreements within the FTC’s jurisdiction.
Non-Compete Agreements Remain in the Crosshairs
Among the harmful labor market practices identified in the February 26 memorandum, non-compete agreements were specifically highlighted as a concern.
The FTC described these agreements as a means by "which employers can use to impose unnecessary, onerous, and often lengthy restrictions on former employees' ability to take new jobs in the same industry after they leave their employment."
FTC Approach to Non-Compete Agreements: Enforcement Rather Than Rulemaking
Chairman Ferguson's directive suggests a shift from rulemaking to targeted enforcement:
- Previous Opposition to Rulemaking: Ferguson had previously disagreed with the FTC's decision to issue the non-compete rule, claiming such rulemaking was beyond the scope of the FTC's authority.
- Focus on Investigation: The creation of the Joint Task Force suggests that the new administration's FTC remains interested in non-competes but will address them through investigations and enforcement actions rather than through rulemaking.
- Legislative Advocacy: The Task Force is charged with seeking opportunities to advocate for legislative or regulatory change, possibly acknowledging that the power to make such changes lies with other bodies, not the FTC itself.
What This Means for Texas Employers
In Texas, non-compete agreements are enforceable if they meet certain requirements.
However, Texas employers may want to consider these steps in the face of continuing FTC scrutiny:
- Review existing non-compete agreements to ensure they serve legitimate business interests
- Reconsider the scope and duration of restrictions placed on departing employees
- Monitor FTC enforcement actions that may establish new precedents regarding what constitutes appropriate use of such agreements
- Stay informed about potential legislative developments that could affect the enforceability of non-competes.
Hendershot Cowart P.C. will continue to share updates on this issue as merited.
More Employment Practices Targeted by FTC
The directive extends beyond just non-compete agreements. The FTC also plans to target other practices affecting workers, including:
- No-poach and non-solicitation agreements between employers
- Wage-fixing agreements
- Labor-contract termination penalties
- Labor market monopsonies, i.e. the labor market is largely controlled by one employer (especially prevalent in rural areas)
- Deceptive job advertising
- Job scams and fraudulent placement services
The New Task Force Structure
The Joint Labor Task Force will include representatives from the FTC’s Bureau of Competition, Bureau of Consumer Protection, Bureau of Economics, and the Office of Policy Planning. This cross-functional approach indicates the FTC's intention to tackle labor market issues from multiple angles – both as consumer protection matters and as competition law violations.
The Task Force will be responsible for coordinating investigations, harmonizing procedures across bureaus, sharing information, conducting research, engaging in public outreach, and identifying opportunities for legislative or regulatory advocacy.
Next Steps
While the previous administration's rule-based approach to non-competes remains in legal limbo, the current FTC remains committed to addressing unfair labor market practices, including what it considers as harmful non-compete agreements.
For employers, this signals a need to re-evaluate current employment agreements and be wary of potential FTC warning letters and other enforcement actions.
Ready to review your employment practices against current regulatory guidelines? Contact the regulatory attorneys at Hendershot Cowart P.C. today