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Noncompetes under pressure: Experts say tailored strategies are key in 2025

Christopher Wood, CPP  

· 5 minute read

Christopher Wood, CPP  

· 5 minute read

Despite mounting legal and regulatory pressure, a significant majority of U.S. employers — 74% — continue to rely on noncompete agreements to safeguard their business interests, according to a 2023 U.S. Government Accountability Office (GAO) report. This enduring reliance persists even as the legal landscape surrounding noncompetes grows increasingly complex and uncertain.

In April 2024, the Federal Trade Commission (FTC) issued a rule banning noncompete agreements for most U.S. workers, with exceptions only for senior executives. The rule, originally set to take effect in September 2024, was blocked by a federal court just weeks before implementation. While the FTC’s broader enforcement remains stalled, the agency signaled its intent to pursue individual enforcement actions.

Meanwhile, momentum at the state level to restrict or eliminate noncompete agreements continues to accelerate. The bipartisan public policy organization Economic Innovation Group (EIG), which monitors these legislative efforts, reports a growing number of states pursuing reform.

In 2025, Arizona introduced a bill to fully ban noncompetes, joining states like California and Minnesota. Other states — including New York, Illinois, and North Carolina — proposed legislation to limit noncompetes based on employee income thresholds, reflecting a broader trend toward more targeted, worker-protective restrictions.

Why employers continue to use noncompetes

According to James Witz and Melissa McDonagh, Co-Chairs of the Unfair Competition and Trade Secrets Practice Group at Littler Mendelson P.C., the rationale is clear: “Employers continue to see employees steal valuable trade secrets or pursue customers they only had access to through their employment.”

Both stated that, “Noncompetes are necessary to prevent former employees from using confidential information and goodwill to unfairly compete.” They noted that this is especially true for senior-level employees, who often have deep insight into company strategy and access to sensitive data. A 2016 report from the Treasury Department’s Office of Economic Policy outlined similar reasons for employers using noncompetes — especially in knowledge-intensive industries — including: protection of trade secrets, strategic leverage, and deterrence of competition.

Alternatives gaining ground

For employers scaling back or eliminating noncompetes, alternative strategies are emerging. “Employers not using non-competes are relying on agreements with confidentiality, non-solicit, notice, garden leave, and/or forfeiture for competition provisions,” McDonagh said. These tools, while less restrictive, still offer meaningful protection when carefully tailored.

The FTC’s 2024 final rule — though currently blocked — outlined several viable alternatives to noncompete agreements that employers can use to protect their legitimate business interests without restricting employee mobility.

These include trade secret protections under federal and state law, non-disclosure agreements (NDAs) to safeguard confidential information, and non-solicitation clauses that prevent former employees from poaching clients or colleagues.

According to the FTC, these tools are generally less harmful to competition and worker freedom, while still offering meaningful safeguards for employers when thoughtfully implemented.

Navigating a legal patchwork

With all 50 states and Washington, D.C. regulating noncompetes in some form, compliance has become a logistical challenge — particularly for multi-state employers. EIG emphasized that this legal fragmentation creates significant administrative burdens for employers, especially those with operations in multiple states.

“Some employers will have a separate template in each state where they employ individuals,” McDonagh began. “Other employers will add an appendix to their restrictive covenant agreement that addresses state-specific modifications.”

Witz observed increasing challenges “for internal teams to keep up with the rapid pace of legal developments regarding noncompetes.” To stay ahead of legal developments, he suggested “setting up at least bi-annual updates with outside counsel subject matter experts to track recent developments and update agreements if necessary.”

EIG also noted that some states impose procedural requirements — such as mandatory review periods or written agreements — that further complicate compliance.

Preparing for federal shifts

In February 2025, the NLRB signaled a notable change in direction when Acting General Counsel William Cowan rescinded prior guidance that challenged noncompete agreements under the National Labor Relations Act (NLRA). The rescinded memos, originally issued by former General Counsel Jennifer Abruzzo, argued that noncompetes unlawfully interfered with employees’ Section 7 rights to engage in protected concerted activity.

This policy reversal suggests that the NLRB is deprioritizing broad enforcement actions against noncompetes, particularly for non-supervisory employees. However, legal experts caution that this does not make noncompetes automatically lawful — state laws and other federal regulations still apply.

McDonagh said that employers should design customized restrictive covenant strategies that align with both the company’s operational needs and the employee’s role, and that seeking legal counsel could help in this process.

Recruitment and retention impacts

Companies are still actively using and enforcing noncompete agreements for senior-level employees, where the protection of strategic knowledge and client relationships remains a priority. However, when it comes to updating existing agreements, many employers are proceeding cautiously.

According to Witz, some companies are concerned that revising current contracts could expose legal weaknesses or prompt employee resistance, especially if the changes highlight flaws or introduce stricter terms. As a result, a growing number of employers are choosing to implement updated, legally compliant noncompete agreements only for new hires, rather than risk disrupting relationships with current staff.

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