The FTC recently finalized a rule banning most non-compete agreements across the nation, making a move to protect workers’ rights and promote job mobility. But, on August 20, a federal district court issued an order blocking the agency from enforcing the rule as planned.

The FTC has appealed the decision and may still take action against non-competes through individual enforcement cases under existing authority.

Even with enforcement delayed, the rule marks a significant shift. I’m Ty Hyderally, and I’ve been an employment attorney for over 20 years. In that time, I’ve seen how non-competes trap employees in roles they want to leave time and time again.

This rule reflects a broader effort to level the playing field between employers and employees, similar to recent new protections for domestic workers in New Jersey. By removing barriers to mobility, it encourages fair competition and broader workplace protections, empowering people to build careers based on merit.

About the Author

Ty Hyderally is a prominent employment law attorney with a practice based in Montclair, New Jersey. He represents clients throughout New York and New Jersey, with a focus on workplace discrimination, retaliation, and leave law compliance.

His firm, Hyderally & Associates, provides legal counsel to both employees and employers on matters involving federal and state labor laws, including noncompete agreement compliance.

Ty Hyderally frequently advises on new and evolving employment legislation. His work has helped shape policies that ensure legal compliance across industries.

What Is a Non-Compete Agreement and Why Was It So Controversial?

A non-compete agreement is a clause that restricts an employee from taking a job with a competitor or starting a similar business after leaving their current position.

These agreements started out with good intentions. They were originally designed to protect companies from losing proprietary information or client relationships. In theory, they were meant to apply to high-level executives or employees with access to sensitive data.

In practice, non-competes have been used far more broadly. I’ve worked with clients in positions like nursing, restaurant service, and entry-level tech who couldn’t take another job in their field due to a non-compete.

These workers usually don’t have access to trade secrets or confidential strategies. A nurse switching hospitals, a server moving to another restaurant, or a junior developer joining a different firm poses rarely poses a risk to the former employer.

When noncompete are being abused like that, they’re not protecting information, but controlling the labor force.

The consequences of this overreach are serious. Workers bound by non-competes often face a stark choice: stay in a job they’ve outgrown or risk legal action.

Some end up accepting lower-paying roles in unrelated fields. Others are forced to move just to stay in the same profession. I’ve even seen people leave the workforce entirely because there was no legal path forward.

These restrictions suppress wages, limit career growth, and discourage innovation. They benefit employers at the expense of workers’ freedom to earn a living and advance on their own terms.

That’s why these agreements became so controversial. They shifted from being a legitimate business safeguard to a widespread tool for locking in labor.

When one in five workers in the U.S. is subject to this kind of restriction, it becomes more than a contractual issue. It’s a systemic problem.

What Does the FTC’s Final Rule Actually Do?

The FTC’s final rule bans most non-compete agreements nationwide, with very limited exceptions. Under the rule, it is now considered an unfair method of competition for employers to enter into, enforce, or attempt to enforce non-compete clauses with most workers.

This applies across all industries and job levels. The overwhelming majority of these agreements will be unenforceable after the rule goes into effect.

The FTC concluded that non-competes stifle competition in labor and product markets. Because they limit a worker’s ability to move between jobs, they make job matching harder and employees’ bargaining power weaker.

They also discourage new business formation and contribute to market concentration. Those lead to higher prices and less innovation. Factors like these combine to restrict the economy as a whole, beyond just the workplace.

Existing non-competes for most workers must be abandoned, and employers are required to notify affected employees. The rule includes model language to make that notice process easier.

Importantly, employers are also barred from entering into new non-competes going forward.

The only exception is for current non-competes involving senior executives. Individuals in policy-making roles who earn more than $151,164 every year may still be subject to noncompete agreements. But, that group makes up less than 1% of the workforce.

For everyone else, the rule aims to end the legal and financial barriers to mobility and economic opportunity.

How Will This Ban Affect Workers?

The FTC estimates that banning non-competes will raise average worker earnings by $524 per year, support the formation of more than 8,500 new businesses annually, and increase patent filings by up to 29,000 per year.

These gains reflect what’s possible when people are free to take their skills where they’re most valued.

Workers can pursue better opportunities or negotiate stronger compensation when they’re not restricted by a noncompete. That creates real upward pressure on wages.

Conversely, knowing their staff can just leave at any time forces employers to offer better working conditions and more competitive pay. That’s how healthy labor markets are supposed to function.

The increase in business formation follows naturally. Many people who might have started their own companies were blocked by non-compete clauses.

With those contracts no longer in the way, people can act on their ideas. That unleashes innovation, particularly from employees who before had the industry knowledge and drive, but not the legal permission to act on them.

This innovation isn’t just theoretical. The FTC projects tens of thousands more patents annually because skilled workers are no longer siloed. When employees move more freely between jobs and industries, they bring ideas with them.

That leads to better problem-solving, more creative products, and greater technological advancement across sectors.

In short, lifting non-competes removes the artificial ceilings that have kept workers from reaching their full potential.

What Does This Mean for Employers?

For employers, the ban on non-competes represents a major shift in how they protect their business interests and keep talent. Companies have relied on non-compete clauses to reduce turnover or prevent employees from joining competitors for a long time.

With that option now off the table, employers will need to rethink their approach.

First, compliance is non-negotiable. Employers must stop using non-competes in new contracts and identify existing agreements that are no longer enforceable. They’re also required to notify affected employees.

Failing to comply can open the door to legal and reputational risk, particularly in industries where non-competes were routinely used.

Even though a federal court has temporarily blocked enforcement of the rule, employers shouldn’t continue business as usual. The FTC is appealing the decision and can still challenge non-competes on a case-by-case basis.

Companies that continue relying on these agreements may find themselves on the wrong side of evolving law and other shifting labor standards.

Beyond compliance, this is also a cultural shift. If you can’t rely on legal threats to keep employees, you have to compete on merit. That means offering competitive pay, clear career growth, flexible work environments, and a workplace culture people want to be part of.

As I often tell business clients, you can’t force loyalty. You have to earn it.

And when it comes to protecting proprietary information, there are still lawful tools available. Non-disclosure agreements (NDAs) and trade secret laws remain valid and enforceable, offering companies a way to protect sensitive data without restricting mobility.

In fact, more than 95% of workers with non-competes already had NDAs in place. That just goes to show the real issue was about limiting movement, not protecting secrets. To better align with compliance and ethical standards, companies should also review their employee privacy practices and workplace policies as a whole.

What Are the Alternatives to Non-Competes?

With non-competes off the table, employers may worry about protecting sensitive information or preventing unfair competition. But in reality, there are already well-established legal tools that do these things without restricting workers’ rights.

• Non-Disclosure Agreements (NDAs): These contracts are enforceable and widely used to protect proprietary information such as client lists, internal processes, and business strategies. The FTC noted that more than 95% of workers with non-competes already had NDAs in place, demonstrating that it was never about protecting trade secrets.
• Trade Secret Laws: Both state and federal laws, including the Defend Trade Secrets Act, give employers legal recourse if a former employee misuses confidential business data. These protections are broad, well-established, and specifically designed to address the concerns non-competes were once meant to solve.
• Positive Incentives: Employers can keep talent by offering competitive pay, opportunities for advancement, flexible work arrangements, and a strong organizational culture. When people feel valued and supported, they’re far more likely to stay.

By investing in the right protections and building a workplace people actually want to be part of, companies can move away from restrictive practices and focus on growth, trust, and long-term success.

Given the legal uncertainty and growing scrutiny surrounding non-competes, transitioning to lawful alternatives like NDAs and incentive-based retention is necessary. The safer path forward is one that respects workers’ rights while still protecting legitimate business interests.

How Should You Prepare Now?

With enforcement of the FTC’s rule temporarily paused and legal challenges underway, it’s still crucial to prepare. Whether you’re an employee subject to a non-compete or an employer relying on them, here’s how to get ready for the rule to take effect:

For Employees:

1. Locate and review your employment agreement. Check whether you’ve signed a non-compete clause and under what terms. These agreements are often buried in onboarding documents or buried in employment contracts.
2. Assess whether the agreement still applies. Most non-competes will become unenforceable under the FTC rule, except for those involving senior executives. Even without the rule in effect, some may already be unenforceable under state law.
3. Seek legal advice if you feel restricted. If a non-compete is limiting your career options, consult an employment attorney. You may already have grounds to challenge it, even before federal enforcement begins.
4. Stay updated on legal developments. Follow the FTC’s appeals process and court rulings. The legal landscape is shifting quickly, and staying informed helps you make smart career decisions.

For Employers:

1. Audit your existing employment contracts. Identify all employees currently bound by non-compete agreements and determine which agreements will be affected by the rule.
2. Prepare formal notice communications. Once the rule takes effect, you’ll be required to notify employees that their non-competes will no longer be enforced. The FTC provides model language you can use for this.
3. Update hiring and onboarding procedures. Remove non-compete clauses from all future employment agreements. Make sure your HR and legal teams are aligned with the new compliance requirements.
4. Strengthen enforceable protections. Review and update non-disclosure agreements (NDAs) and trade secret protocols to protect confidential information without violating the new rule.
5. Focus on positive retention strategies. Enhance employee satisfaction and retention by investing in competitive compensation, career growth opportunities, and a workplace culture that people want to stay in.

Taking these steps now will help you stay ahead of the legal curve and avoid unnecessary risk, whether you’re protecting your rights as a worker or ensuring compliance as an employer.

A Turning Point for Workers and Employers

The FTC’s move to ban most non-compete agreements redefines how we view fairness and freedom in the workplace. For too long, I’ve seen how these contracts limit opportunity, suppress wages, and discourage innovation.

This rule, even with enforcement temporarily paused, signals a fundamental shift toward valuing mobility and merit over control.

Employers now have an opportunity to rebuild trust by retaining talent through respect, transparency, and meaningful incentives rather than fear of legal retaliation. And workers are closer than ever to reclaiming the right to grow, compete, and thrive on their own terms.

Whether you’re navigating a current agreement or preparing for what comes next, this is the moment to get informed, take action, and align yourself with the future of workplace law.