The End of Noncompetes: What Employers Must Know

Damian Zimmerman
Dec 7, 2025
2 min read

🚫 What Changed?

Earlier this year, the Federal Trade Commission (FTC) finalized a sweeping rule banning most noncompete agreements nationwide. This landmark decision marks a major shift in employment law, aiming to promote worker mobility, wage growth, and innovation.

📜 What Is a Noncompete Agreement?

A noncompete agreement restricts employees from working for competitors or starting similar businesses for a set period after leaving a job. Historically, these clauses were common in tech, healthcare, finance, and executive contracts.

⚖️ Why the FTC Banned Them

Anti-competitive effects: Noncompetes were found to suppress wages and limit job opportunities.
Economic mobility: The ban is expected to unlock billions in wage growth.
Legal overreach: The FTC argued that noncompetes violate Section 5 of the FTC Act, which prohibits unfair methods of competition.

🏢 What Employers Must Do Now

Review existing contracts: Identify and remove noncompete clauses from employment agreements.
Update onboarding materials: Ensure new hires are not asked to sign noncompetes.
Rely on alternatives:
- Nondisclosure agreements (NDAs) to protect trade secrets.
- Nonsolicitation clauses to prevent poaching of clients or staff.
- Robust IP protections for proprietary information.
Communicate with employees: Clarify the changes and reassure staff about confidentiality expectations.

🧠 Legal Risks & Compliance

Enforcement: The FTC can impose penalties for continued use of noncompetes.
State laws: Some states may still allow limited restrictions—consult local counsel.
Litigation exposure: Employers risk lawsuits if they attempt to enforce voided noncompetes.

💡 Strategic Takeaways

Shift focus from restriction to retention: Invest in culture, compensation, and career growth.
Strengthen internal policies around data security and client relationships.
Stay informed: Legal challenges to the FTC rule are ongoing, and future court decisions may impact enforcement.

📞 Need Help Navigating the Ban?

Our firm advises employers on compliance, contract restructuring, and workforce strategy. Contact us to ensure your business is protected and future-ready.