USA Trends and Developments Contributed by: Dawn Mertineit, Michael Wexler and Marcus Mintz, Seyfarth Shaw LLP
Introduction Restrictive covenant laws in the United States con - tinue to undergo major shifts across various juris - dictions, with no sign of slowing down. While the Federal Trade Commission (FTC) has withdrawn its pursuit of a nationwide ban on non-competes, many states continue to recalibrate their restrictive cove - nant laws, impacting how businesses must draft their agreements (and in some cases prohibiting certain covenants outright or sharply limiting their enforce - ability). Accordingly, businesses seeking to protect their trade secrets, confidential information, and other valuable assets must navigate an ever-changing legal landscape to ensure that such information remains subject to robust protections. Federal Restrictions on Non-Competes While the FTC implemented a rule in April 2024 that would have banned virtually all non-competes nation - wide, two separate federal courts blocked the rule from going into effect later that year, prompting the FTC to appeal those decisions to the Fifth and Elev - enth Circuits respectively. As anticipated, in Septem - ber 2025, the FTC voluntarily dismissed both appeals, effectively abandoning its previous efforts to enforce a nationwide ban on most non-competes. Nonetheless, the FTC has not completely abandoned its focus on non-competes. Instead, it has contin - ued targeting businesses allegedly using overbroad restrictive covenants or requiring a broader swath of employees than is reasonable to execute restric - tive covenant agreements in a manner that the FTC has deemed anti-competitive. The FTC has specifi - cally focused its scrutiny on certain industries – most notably healthcare providers – and has also increased case-by-case enforcement efforts. In fact, in the fall of 2025, the FTC launched a public inquiry “to better understand the scope, prevalence, and effects of employer noncompete agreements” in order to “inform possible future enforcement actions”. The FTC sought comment from members of the pub - lic regarding the “use of noncompete agreements”, claiming that “[u]nreasonable noncompete agree - ments have proliferated for too long in the dark”.
In other words, the regulatory pressure is far from disappearing, and businesses operating in the United States must carefully safeguard their intellectual prop - erty in the event their restrictive covenant agreements
are struck down or otherwise limited. State-Level and Judicial Initiatives
Notwithstanding the FTC’s abandoned efforts to effectuate a nationwide ban (and in addition to the more limited FTC enforcement actions discussed above), another significant challenge for employers in the United States is the continued proliferation of state statutes governing – and largely limiting – restric - tive covenants. Among other developments, there has been signifi - cant legislative activity in recent years, including but not limited to: • industry-specific legislation limiting the scope of permissible covenants (most notably in the health - care industry); • low- or middle-wage bans, which preclude the use and/or enforcement of restrictive covenants with respect to employees or independent contractors earning below a specified compensation threshold; while most of these laws are limited to non-com - petes, more states are extending such limitations to non-solicitation provisions as well (complicating matters further, each state uses different thresholds – and different methods for calculating them – with many thresholds increasing annually and some - times unpredictably); • fee-shifting provisions or other civil (and sometimes criminal) penalties where employers impose or attempt to enforce restrictive covenants in violation of applicable statutes; • right-to-counsel requirements, where employers must notify employees of their right to seek legal counsel before executing an agreement; and • limitations on choice-of-law and/or venue provi - sions in restrictive covenants. Notably, Minnesota banned virtually all employee non- competes in 2023, the first state to ban such cove - nants almost entirely in well over a century, becoming the fourth state to do so. Since then, several state legislatures have taken steps to enact similar non-
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