You may recall that in April 2024, the Federal Trade Commission (FTC) finalized a rule that would have made most non-compete clauses between an employer and employee unenforceable. The FTC concluded that non-compete clauses suppress wages, stifle workers’ mobility, harm competition and violate Section 5 of the Federal Trade Commission Act. The final rule was scheduled to take effect on September 4, 2024. However, on August 20, 2024, a federal district court in Texas issued an order stopping the FTC from enforcing the rule. The FTC initially appealed the ruling in October 2024 but then decided in September 2025 to dismiss its appeal. What does this mean for employers?
Three Key Takeaways for Employers
1. Employers still need to be wary of targeted enforcement actions by the FTC. That is, despite abandoning its effort to impose a broad rule prohibiting most non-compete clauses, the FTC has made it clear that enforcement of overly broad restrictive covenants remains a top priority, and the Commission will continue enforcement on a case-by-case basis. For example, in September 2025, the FTC successfully brought an enforcement action against Gateway Services, Inc. to stop the company from enforcing non-compete agreements against approximately 1,800 employees. The FTC noted that Gateway required nearly all employees to sign a non-compete agreement that generally prohibited them from working in the pet cremation service industry anywhere in the United States for one year after their employment ended.
2. Employers should be aware that an increasing number of states are passing laws limiting the enforceability of non-compete agreements. While Connecticut has not passed a law broadly banning non-compete agreements, state law limits the enforceability of non-compete agreements in certain professions such as for physicians, APRNs, physician assistants, security guards, broadcast employees and home health care, companion, and homemaker service workers. Further, numerous bills have been raised over the years in the Connecticut legislature—including during the most recent session—seeking to significantly limit the enforceability of non-compete agreements. It is likely that this issue will surface again in the next legislative session.
3. Considering the increasing scrutiny of non-compete agreements, employers should review existing non-compete agreements and be sure that they are narrowly tailored to protect a legitimate business interest, such as trade secrets, and are reasonable in all aspects including geography, scope and duration. Employers should not blanketly require all employees to sign non-compete agreements. Instead, non-compete agreements should only be required for senior level or key employees with access to confidential information or important client relationships. Employers should also consider having key employees sign non-solicitation covenants and confidentiality agreements in lieu of non-compete agreements that more broadly prevent employees from working for a competitor.
For more information about non-competes, please contact Carmody’s Labor & Employment lawyers:
Nick Zaino
Partner
[email protected]
203.578.4270
This information is for educational purposes only, to provide general information and a general understanding of the law. It does not constitute legal advice and does not establish any attorney-client relationship.