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Employment Law Update: FTC Ends Pursuit of Non-Compete Prohibition

Earlier this month, the Federal Trade Commission (FTC) decided to cease its efforts to implement a nationwide prohibition on employer non-compete agreements. This decision followed the agency's decision not to appeal against a nationwide injunction that had stalled the Rule's implementation. Initially proposed in January 2023, the Rule was anticipated to significantly impact non-compete agreements across the country. After facing several court challenges, the FTC has quietly abandoned the initiative.

Despite the end of this federal effort, the FTC has indicated it will prioritize the scrutiny of restrictive covenant practices, including non-competes, particularly in the healthcare sector, where worker mobility is often restricted. This shift in focus underscores the importance for employers to remain vigilant about state laws governing non-compete agreements.

Employers must now navigate a complex landscape of state-specific regulations. States such as Maryland, the District of Columbia, and Virginia have enacted various laws that either prohibit or limit non-compete agreements based on earning thresholds or specific industries. For instance, Maryland has implemented blanket prohibitions for low-wage earners, and this year expanded bans concerning healthcare workers.

Virginia has a similar prohibition for low-wage earners and, as of July 1, 2025, has extended this to non-exempt workers under the federal Fair Labor Standards Act (FLSA). The District of Columbia's robust prohibition covers most workers, with exceptions for certain niche jobs and highly compensated individuals.

Given these developments, it is crucial for businesses to carefully review and analyze their employment agreements to ensure compliance with state laws. Employers should craft provisions that protect their interests while adhering to the varying state restrictions on non-competes. Whiteford's Labor and Employment group is prepared to assist employers in reviewing their approach to restrictive covenants and ensuring continued compliance with state laws.
 

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