New England Biz Law Update
The Federal Trade Commission’s sweeping rule to ban most employee noncompete agreements nationwide remains in limbo amid leadership changes and ongoing legal challenges.
Meanwhile, individual states continue to forge their own paths on restrictive covenant regulation.
Court challenges, (unlikely) defense
The FTC’s noncompete ban, finalized in April 2024, faced immediate legal challenges in three states. While a Pennsylvania court upheld the ban, courts in Texas and Florida ruled against it, with the Texas court issuing a nationwide injunction preventing the rule from taking effect.
Following the recent administration change, the FTC has requested 120-day stays in its appeals of the Texas and Florida decisions, signaling possible abandonment of the rule. The agency must submit status reports by mid-July 2025 on how it intends to proceed.
Given the new Republican majority at the FTC and their previous opposition to the noncompete ban, analysts expect the agency to withdraw its defense of the rule.
State moves
State-level activity, however, continues to reshape the noncompete landscape.
Ohio: In February 2025, Ohio introduced legislation that would make it the fifth state with a near-complete ban on noncompete agreements, joining California, Oklahoma, Minnesota, and North Dakota. The Ohio proposal goes further, also prohibiting forum selection clauses and training reimbursement requirements.
New York: Action also continued in New York in February, where lawmakers introduced revised noncompete legislation that appears positioned for success. The new bill (Senate Bill 4641) addresses Governor Kathy Hochul’s previous concerns by including a carve-out for highly compensated individuals earning $500,000 or more annually.
Currently, 33 states maintain laws requiring noncompete agreements to meet reasonableness standards regarding duration, scope, and geographic reach. This patchwork of state regulations continues to present compliance challenges for multi-state employers.
