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Photo by Netania Moore

Raphael Moore is general counsel of the Veterinary Information Network, an online community for the profession.

As anyone who follows government policy on noncompete agreements probably knows, the past 18 months have been a roller coaster in the United States.

The ride began in early May 2024, when the Federal Trade Commission published a rule that would render most employer-employee noncompete agreements in the country unenforceable. Noncompetes are clauses in contracts meant to prevent former employees from competing against their ex-employers, usually within a particular geographic area for a defined period of time. They are common in the veterinary profession, among other occupations.

The FTC's majority position — the vote was 3 to 2 — was that such agreements unfairly restrict workers' mobility, suppress wages and stifle innovation. Short of a narrow exception for certain senior executives, the rule would apply to workers nationwide as of Sept. 4, 2024.

Before the rule went into effect, litigation ensued. On July 3, 2024, a Texas court issued a preliminary injunction in Ryan LLC v. FTC, pausing enforcement of the rule for a limited number of plaintiffs in that one case. But the action foreshadowed judicial challenges on the horizon.

The following month, on Aug. 20, 2024, the same court struck down the FTC rule entirely, holding that the agency had exceeded its statutory authority and acted arbitrarily in adopting such a sweeping prohibition. This time, the judge issued a nationwide injunction, preventing the rule from taking effect anywhere in the U.S.

Initially, the FTC fought back. In October 2024, it asked the U.S. Court of Appeals for the Fifth Circuit to overturn the Texas lower court decision.

Then in January, the roller coaster made a U-turn as a new president took office, marking a sharp change in philosophy and direction throughout the federal government.

In March, the FTC asked the court to pause its own appeal. This signal that it was reconsidering its position gave the Fifth Circuit really just one move — to grant the request, giving the FTC time to decide whether to continue the fight.

In July, the FTC asked to extend the pause, or stay, for another 60 days.

Finally, on Sept. 5, the FTC formally withdrew its appeal and announced that it would "accede to the vacatur" of the rule — a fancy way of saying it would accept the court’s judgment and abandon the nationwide ban on noncompete clauses.

Here, the roller coaster took another turn. Even as it ended its attempt to outlaw noncompetes through rulemaking authority, the FTC simultaneously flexed its enforcement muscle with a targeted action against a pet memorial company it claimed was using overly broad noncompete provisions to restrain trade. The move is known as a "Section 5 action," a reference to the agency's mandate under Section 5 of the Federal Trade Commission Act to prevent "unfair methods of competition."

When the FTC uses case-by-case enforcement under Section 5 instead of a formal rule, it has wide discretion over which companies it investigates and which agreements it challenges. The use of case-by-case enforcement discretion could lead to uneven or politically motivated enforcement — for example, targeting certain industries while ignoring others. As there is no national standard defining what constitutes an "unfair method of competition," the FTC's choices could appear driven more by political priorities than by neutral legal principles.

Further, the lack of clear standards leaves businesses guessing whether their agreements might be deemed anticompetitive. While the FTC has stated it would evaluate noncompetes "on the facts of each case," it has not issued detailed guidance. Regulatory uncertainty and lack of rules have a chilling effect on employers pursuing even legitimate business interests, such as protection of trade secrets.

Section 5 enforcement has been a tool of the FTC for almost 90 years. The issue isn't that the FTC is using it but how broadly its intended use is now being interpreted.

Concern over political priorities is amplified by the simultaneous publication by the FTC of a Request for Information (RFI) that invites public comments (by Nov. 3) about employers' use of noncompete agreements.

RFIs conventionally are used as a neutral vehicle to seek general comments. Normally, the FTC would ask for data, trends or policy views; for instance, asking commenters to describe the effects of noncompetes in their industry, information that would be used to guide rulemaking.

This one explicitly asks for the identities of employers known to use noncompete clauses, the job functions or roles subject to them, salary ranges, and terms of noncompetes and how they may have harmed workers. It is unusual in how personal it gets.

The agency is inviting the public essentially to name names. Rather than asking about industrywide trends, they are asking "Who did it?" Rather than asking "Should we issue a new rule?" they are asking "Who should we investigate?"

This is not standard practice. The FTC is essentially crowdsourcing enforcement leads, and in doing so, it is blurring the line between policymaking and investigation. They are using the RFI mechanism to find their next target. This raises due process concerns, since employers might be named publicly in the submissions — even though the allegations will be unverified.

The FTC also appears to be focusing on a particular sector. Concerns specific to health care are explicitly mentioned, with the RFI noting that in health care markets, noncompetes may limit employment options. This may be true. But coupled with the fact that the employers the FTC chose for some of its first enforcement actions are within health care (with warning letters issued to several large health care employers and staffing firms), it raises a red flag.

Because Section 5 enforcement actions normally start with internal administrative proceedings, companies can face significant costs and reputational harm before a federal court can intervene and review cases on the merits. Thus, the current structure can give the FTC significant power to pressure settlements even in cases where legal theory is weak. Then again, supporters of the approach would argue that case-by-case action enables the agency to focus on those cases that are most harmful.

Suppose you know of an employer using questionable noncompetes and would like to report them to the FTC. Tread carefully. Comments submitted to any federal agency become publicly available through the agency's online docket unless the commenter requests confidentiality and the agency grants it. The docket is public, searchable and permanent. The commenter risks being sued for defamation (at least theoretically — I haven't seen an actual court case). And if the statement/accusation is false, it can be actionable. There are some limited defenses, such as petitioning the government and, potentially, First Amendment rights, but there is no absolute immunity.

Time will tell whether partisan politics is a real concern. Right now, nothing overtly suggests that the FTC is acting only for political reasons, but the pattern of enforcement so far certainly leaves room for concern.

Raphael Moore, JD, LLM, has been general counsel of the Veterinary Information Network, an online community for the profession, since the 1990s. He enjoys figuring out esoteric legal issues and is a frequent contributor to VIN legal and practice management message board discussions. An avid hiker, he has a knack for being attacked by bears in Yosemite. He lives with his wife and their two daughters in a geodesic dome on the outskirts of Davis, California, where he raises alpacas, goats and chickens.