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Trump’s FTC Abandons Biden-Era Ban On Noncompete Agreements

The Federal Trade Commission has abandoned the historic prohibition on noncompete agreements it proposed just a year and a half ago, the result of President Donald Trump’s change in leadership at the antitrust regulator.

The agency said Friday that it was voluntarily dropping its appeals in court cases where employers had challenged the legality of the noncompete ban finalized under former President Joe Biden. While the rule had been temporarily blocked due to the litigation, the agency’s withdrawal of support means it is now effectively dead.

Noncompete clauses forbid workers from taking jobs at competing firms for a certain amount of time after leaving an employer. Critics say the agreements keep wages down and stifle innovation by locking workers into their jobs, preventing them from starting their own businesses or taking their talents to the highest bidder.

The ban on noncompetes was one of the hallmark progressive reforms of the Biden era, championed by former FTC chair Lina Khan, who said outlawing the agreements was about restoring workers’ liberty in the labor market. Khan stepped down as FTC chair upon Trump’s inauguration.

Trump named Andrew Ferguson, who’d opposed the noncompete ban, to be the commission’s new chair, and tried to fire two Democratic commissioners before their terms were up. One of those Democrats, Alvaro Bedoya, resigned, while the other, Rebecca Slaughter, remains on the commission while she challenges Trump’s firing as illegal.

The commission said Friday it had voted 3-1 in favor of abandoning the noncompete rule, with Slaughter, now the lone Democrat, dissenting.

The ban’s survival appeared unlikely as soon as Ferguson was named to lead the agency. When Khan introduced the rule, Ferguson claimed it went well beyond the agency’s power, and he maintained that argument in a statement Friday, saying its “illegality was patently obvious.”

Not only would the rule nullify some 30 million noncompete contracts, Ferguson said, it would redistribute “nearly a half trillion dollars of wealth within the general economy.”

That, indeed, was an aim of the rule, since the Democratic commissioners had argued employers were illegally suppressing workers’ wages through an anticompetitive practice.

Trump's shakeup at the FTC paved the way for the noncompete rule to be killed.

The agency estimated the ban would boost workers’ earnings by more than $400 billion over a decade, by enabling them to switch to new jobs or demand higher pay at their existing ones. The estimated shift in wealth from corporations to their employees helps explain why businesses and their lobbies, like the U.S. Chamber of Commerce, opposed the rule so strongly and sued to stop it.

Slaughter wrote in a dissent that the Republican majority had decided, “sadly,” to “throw in the towel” on what should have been a landmark reform empowering workers.

“Perhaps the agency is hoping that, by dismissing the Commission’s appeals and refusing to continue defending the rule in court, no one will notice that the FTC is choosing the side of controlling bosses over American workers,” she wrote.

Polling by Ipsos last year showed that a majority of Americans backed a ban on noncompete agreements, though less than a third said they were familiar with the FTC’s rule. The agency said it received 26,000 comments from the public on the proposal, with more than 25,000 of them in support of a ban.

The American Economic Liberties Project, a progressive think tank that focuses on antitrust issues, said Friday that Ferguson had “sold out” workers and sided with business lobbies by jettisoning the rule.

“Today’s decision to walk away from that rule is a stunning betrayal of workers, entrepreneurs, and the agency’s own mission,” Nidhi Hegde, the group’s executive director, said in a statement.