Recent years have seen dramatic federal regulatory and enforcement activity regarding employee non-compete agreements. Under the Biden administration, the Federal Trade Commission (FTC) adopted a sweeping rule to ban nearly all non-compete clauses nationwide, but that rule was struck down by a federal court in 2024. After this judicial setback, rather than defend the broad ban of non-competes, the FTC instead shifted to targeting specific non-compete agreements it considers unfair under Section 5 of the Federal Trade Commission Act (FTC Act), especially those that are overly broad or lack legitimate business justification.
Last month, the FTC issued a proposed consent order against Gateway Services, Inc. and Gateway US Holdings, Inc. (collectively, Gateway), addressing the companies’ use of non-compete agreements for employees in the United States. Gateway required nearly all employees — regardless of their role — to sign non-compete agreements barring them from working in the pet cremation industry nationwide for a year after leaving their employment with Gateway. Over 1,780 employees were affected, from executives to hourly workers. The FTC found these sweeping restrictions stifled competition and limited job opportunities, arguing that any legitimate business interests that Gateway had could be protected with less restrictive measures.
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