The Trump administration dropped its legal defense of an aggressive Biden-era ban on employee noncompete agreements, marking a return to the status quo for federal policy on labor competition.
In court filings submitted Friday, the Justice Department asked federal appeals courts in New Orleans and Atlanta to dismiss appeals defending the Federal Trade Commission’s 2024 rule that prohibited noncompete clauses in employment contracts. That rule, enacted under former President Joe Biden, was challenged by industry groups and struck down by two federal judges earlier this year.
The DOJ’s decision to abandon the appeals effectively ended legal efforts to revive the FTC’s attempt at a nationwide blockade on employee noncompete agreements. It also prevents courts from issuing a broader ruling on whether the commission has the authority to issue such regulations under antitrust law.
The development was widely expected. FTC Chairman Andrew Ferguson, an appointee of President Donald Trump and longtime critic of the rule, said earlier this year that the commission was reassessing the policy initially proposed by his predecessor, Lina Khan. Ferguson and other Republicans on the commission have argued that the FTC lacks authority to impose blanket prohibitions on private contract terms, asserting that federal antitrust enforcement must rely on case-by-case analysis rather than sweeping regulation.
The FTC’s original rule cited data showing that more than 20% of U.S. workers were subject to noncompete clauses, which the agency said artificially suppressed wages, limited worker mobility, and harmed competition for talent. The rule was lauded by labor advocates but fiercely opposed by business groups, including the U.S. Chamber of Commerce, which sued to block its implementation.
Additionally, the Biden-era noncompete ban raised red flags in early litigation before federal district judges. Trial judges, including U.S. District Judge Ada Brown, a Trump appointee, ruled in August last year that the Biden-era FTC exceeded its authority. That matter originated from lawsuits brought by a marketing firm, a real estate developer, and the Chamber of Commerce.
During Trump’s first term, his administration argued that while certain applications of noncompete agreements may be unlawful, the agreements should not be categorically banned under federal law. In a signal of the administration’s evolving approach, the FTC on Thursday announced its first noncompete-related enforcement action of Trump’s second term.
The agency announced a settlement that barred the nation’s largest pet cremation business from enforcing noncompete clauses with 1,800 employees. The FTC said the company’s use of sweeping noncompetes, including for low-level workers, illegally blocked competitors from entering the market.
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“Our elites may have forgotten about American workers, but the Trump-Vance FTC hasn’t,” Ferguson wrote in a statement on X on Sept. 4.
“Unfair noncompete agreements harm working Americans by preventing them from seeking better wages and opportunities elsewhere. And they can harm consumers by preventing workers from taking jobs or opening businesses to meet consumer demand,” he added.