Next week, the Federal Trade Commission (FTC) faces a critical deadline over whether it will continue to defend a ban on noncompete agreements (that is, employment contracts that prohibit workers from taking job at an employer in the same industry) issued under its former chair Lina Khan. It seems unlikely that new chair Andrew Ferguson will keep the important safeguard for workers’ economic liberties alive.
A Trump-appointed judge in Texas, Ada Brown, set aside the noncompete ban last August, claiming that the FTC lacked the statutory authority to issue it, and that it was “arbitrary and capricious” under the Administrative Procedures Act. Because this was an APA set-aside and not a nationwide injunction, the recent Supreme Court ruling against nationwide injunctions does not actually apply, though many have been skeptical of Judge Brown’s authority to block noncompete agreements nationwide. (That’s especially because a separate suit in Pennsylvania upheld the ban, while another lawsuit in Florida is under appeal.)
The FTC then appealed Judge Brown’s ruling to the Fifth Circuit Court of Appeals, but since the Trump takeover, the agency has not acted since filing a motion in March putting the case in abeyance. That abeyance ends July 10, when Ferguson will have to make a decision.
Ferguson opposed the ban when it was finalized last year, saying that it was “the most extraordinary assertion of authority in the Commission’s history.” None of the Democrats who supported the bill are currently in any position to challenge Ferguson: Donald Trump illegally fired the two remaining Democrats last year, and one of them, Alvaro Bedoya, left to take a new job while he continues to challenge his firing in court.
So it isn’t hard to put those stories together and conclude that Trump’s FTC will not defend the noncompete ban. “It’s extremely disturbing that this FTC is hell bent on knee-capping itself, despite clear statutory authority to return billions in wages to workers across the country,” said Lee Hepner, senior legal counsel with the American Economic Liberties Project.
But that does not mean that all noncompete agreements will be enforceable across the United States. Since the FTC’s final rule, states and localities have moved forward against noncompete agreements. It was a key plank in Zohran Mamdani’s platform to fight corporate exploitation, which would impact New Yorkers if the city banned them.
To be clear, the state and local movement on noncompete bans is not a perfect solution. If Ferguson goes forward with killing the federal ban, millions of workers would be at risk of signing employment papers that tie them to their employer and diminish their opportunity to find higher wages and better jobs elsewhere. But there’s no other real option for progress, and supporters believe that getting noncompete bans in place throughout the country will build momentum for Congress or the next FTC to finish the job.
A noncompete clause in an employment contract restricts workers from going to another employer in the same field, often for years. Once used for high-level executives to protect trade secrets, noncompetes have been found in the contracts of fast food workers, pet groomers, janitors, and a host of other occupations. The intent is clear: If lower-wage workers cannot move jobs, they cannot bargain for more money. “Labor markets are heavily concentrated, and restricting worker mobility is just another way to avoid offering workers a fair wage and working conditions,” Hepner said.
When the FTC issued the ban, it estimated that earnings would increase by $400 billion over a decade as a result. But the extinguishing of this rule under Trump’s FTC does not end the movement to ban noncompetes, in either Democratic or Republican states.
Four states have full bans on noncompete agreements, and the names may surprise you: California, Minnesota, North Dakota, and Oklahoma. The two red states have had these bans in place since the 19th century; Minnesota only enacted its ban in 2023.
Dozens of new noncompete bans or limitations have been introduced in state legislatures this year.
Several other states have more limited bans, in which noncompetes are only legal above a certain income threshold. Washington, Oregon, Colorado, Illinois, Virginia, Maryland, Rhode Island, New Hampshire, and Maine have these kinds of restrictions, though for some states the income threshold is rather low (only 200 percent of the federal poverty line in the case of New Hampshire).
A number of states have other restrictions. Nevada companies cannot use noncompete agreements on hourly workers, for example. Idaho restricts them to “key employees” in a company. Louisiana noncompete agreements can only be two years in duration. New Jersey bans noncompetes for domestic workers.
Still, ten states have no laws on the books about noncompetes, with some leaving whether the contractual agreement is “reasonable” up to the courts.
But there has been some movement since this became a federal priority under Khan’s FTC, since more information became available about the damage these clauses can do, and since the holdup of the federal ban forced states into action. In March, Wyoming, one of the most conservative states in the nation, made void any noncompetes signed after July 1, except those covering executives or managers, related to the sale of a business, or due to the protection of trade secrets. While this still leaves a lot of noncompete agreements in place, it sets a benchmark that virtually every other state should be able to meet or surpass.
There are also industry-specific bans that have been put in place. Arkansas passed a noncompete ban for health care workers in March, and Indiana and Colorado did the same in June. Thirty-two states now ban or limit noncompete agreements in the health care sector.
According to a tracker from the Economic Innovation Group, dozens of new noncompete bans or limitations have been introduced in state legislatures this year. That includes complete or near-complete bans introduced in Arizona, Illinois, Indiana, New Jersey, Rhode Island, Tennessee, Texas, Ohio, and Michigan. Those last two midwestern states, Ohio and Michigan, currently have no noncompete laws at all.
States are also becoming more creative about fighting the ways the industry has innovated off noncompetes into novel wage-suppressing activities. Hepner notes that several states are working on banning training repayment agreement provisions (TRAPs), where workers cannot leave a job for a competitor without paying the employer back for training expenses.
And then there is the unique possibility of a local noncompete ban, as Mamdani, who officially won the Democratic nomination for mayor of New York City on Tuesday, has proposed. The city council introduced a noncompete ban in 2024, but it stalled out. “As Mayor, Zohran will ensure the city implements a total ban on coercive non-compete clauses,” Mamdani’s campaign wrote on its website. “That would protect not only full-time staff, but also gig-economy workers, part-time employees, interns, and more.”
Noncompete bans have been shown to be popular in polling, as the bipartisan support for them at the state level makes clear. A state-by-state organizing blitz to ban the practice is obviously a second-order solution. But given a Trump administration that has demonstrated no interest in supporting workers, it’s just about the only solution there is.