The FTC Withdraws From Defending Landmark Non-Compete Ban, Leaving Workers Unprotected from Exploitative Contracts, Including TRAPs and Other Stay-or-Pays

September 5, 2025 | WASHINGTON, D.C. — The Federal Trade Commission (FTC) surrendered in the fight to free workers from non-compete agreements today, filing a motion to withdraw from defending its landmark rule banning traditional and de facto non-competes—including Training Repayment Agreement Provisions (TRAPs) and other stay-or-pay contracts. The rule was blocked by the courts after a lawsuit was filed by the Chamber and other business interests in the conservative Fifth Circuit. Had the rule been enforced, it would have outlawed new non-competes and voided existing ones for nearly all workers, empowering millions to seek better jobs and wages. 

“The Trump Administration just handed corporations a license to trap workers in bad jobs. Research shows that employers are increasingly relying on TRAPs, a contract term that is akin to modern-day indentured servitude—forcing low-wage workers to pay their bosses just to quit. By abandoning this fight, Trump and FTC Chair Ferguson are turning their backs on working people. This FTC will be remembered for rigging the system—suppressing wages, crushing economic freedom, and putting bosses before people,” said Student Borrower Protection Center (SBPC) senior policy advisor Chris Hicks.

“This is a major setback for working people in the United States,” said Open Markets Institute Legal Director Sandeep Vaheesan. “Instead of defending a landmark rule that frees tens of millions of Americans from non-compete clauses that bind them to their present job, Andrew Ferguson’s FTC once again sides with corporate interests.”

Instead of defending a rule that would create an equal playing field for all workers and honest employers, the FTC has indicated it instead plans to review the use of non-competes on a case-by-case basis. This means that if a worker is locked into a non-compete and files a complaint with the FTC, it could take years to find out if it is an enforceable contract term or not. This uncertainty is all but assured to create a chilling effect on workers that drives down wages and reduces job mobility. Simply put, one-off enforcement actions are no substitute for marketwide rules that protect workers across the country because large employers know that the agency lacks the staff capacity to quickly review and investigate all of the complaints it receives.

The FTC estimates that banning non-competes would empower the roughly one-in-five Americans currently restrained by non-compete agreements to seek better wages and working conditions with other employers. It was expected to promote the creation of more than 8,500 new businesses each year and generate over $400 billion in increased wages for workers over the next decade. 

Background

On April 23, 2024, the FTC issued a final rule promoting competition and protecting the fundamental freedom of workers to change jobs by banning non-compete agreements nationwide. The FTC announced its notice of proposed rulemaking in January 2023 and received more than 26,000 comments on the proposed rule, with over 25,000 comments in support of the FTC’s proposed ban on non-competes. The FTC carefully reviewed each comment over the next year and incorporated numerous changes to the proposed rule in response to public feedback.

Included in the rule is a prohibition on de facto non-compete clauses, such as Training Repayment Agreement Provisions (TRAPs). The rule would ban employers from using TRAPs to charge departing employees for training cost that “is not reasonably related to the costs the employer incurred for training the worker.” As shown by past SBPC investigations and academic research, if workers bound by a TRAP attempt to leave their job, the cost that they will be on the hook for can be—and often is—arbitrarily made up by the employer. 

The day after the rule was finalized, the U.S. Chamber of Commerce and other corporate industry groups filed a lawsuit in the Eastern District of Texas seeking to block the FTC’s rule. On August 20, 2024, the judge in that case issued an order stopping the FTC from enforcing the rule. The court’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions.

Further Reading

SBPC Blog: As Trump Abandons Workers, Labor Day Reminds Us to Keep Protecting Workers

Read the FTC’s rule on non-compete agreements: Non-Compete Summary and Rule

Background on the FTC’s non-compete rule here: Fact Sheet on the FTC’s Non-compete Rule and Estimated Increases in Total Annual and Average Worker Earnings by State

State-by-state non-compete factsheets here: Statewide Impact 

Additional background on TRAPs: Background on Training Repayment Agreement Provisions

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About Student Borrower Protection Center

Student Borrower Protection Center (SBPC) is a nonprofit organization focused on eliminating the burden of student debt for millions of Americans. We engage in advocacy, policymaking, and litigation strategy to rein in industry abuses, protect borrowers’ rights, and advance racial and economic justice.

Learn more at protectborrowers.org or follow SBPC on Twitter @theSBPC.