Federal Trade Commission Shifts Noncompete Enforcement Strategy Focusing on Healthcare Industry

This year has seen a significant shift in Federal Trade Commission (“FTC”) enforcement policy with respect to noncompetition provisions, and the FTC has identified the healthcare industry as an area of particular interest.  Abandoning its efforts to impose a blanket ban on all noncompetes, the FTC has issued warning letters to healthcare employers and invited the public to provide information to help the FTC prioritize resources for targeted investigations and enforcement actions.

Strategy Shift from Blanket Ban to Targeted Case by Case Enforcement

In April 2024, under the leadership of Biden nominee Lina Khan, the FTC finalized a rule prohibiting nearly all employer-employee noncompete agreements (the “Final Rule”).  The implementation of the Final Rule would have invalidated noncompete agreements already in existence as well as new agreements with noncompete clauses, affecting an estimated 30 million American workers.  Before the rule could take effect, federal district courts in Texas and Florida enjoined the FTC from enforcing the rule, holding that the FTC lacked the authority to issue a nationwide ban on noncompete agreements. Under Khan’s leadership, the FTC appealed the decisions issued by the Texas and Florida district courts.

On September 5, 2025, under the leadership of current FTC Chairman Andrew N. Ferguson, the FTC decided to vacate the Final Rule, formally ending the Biden administration initiative to eliminate such contracts nationwide.  At the same time, Ferguson issued a statement stressing that the FTC “will continue to enforce the antitrust laws aggressively against noncompete agreements” by “patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers, and taking bad actors to court.”

Recent Actions Taken by the FTC

On September 4, 2025, the FTC filed an enforcement action against Gateway Services, Inc., the largest pet crematorium in the U.S.  According to the FTC's complaint, almost all the company's employees were subject to non-competes that prohibited them from working in the pet cremation service industry anywhere in the U.S. for one year after the termination of their employment. These non-competes were applied "without any individualized consideration" of an employee's role and covered over 1,780 employees, including highly compensated executives, hourly workers, facility-level laborers at cremation facilities, and customer service representatives.

The settlement with the FTC bars noncompete agreements except in limited circumstances. Specifically excluded from the noncompete prohibition are those entered into by directors, officers, or senior employees, in conjunction with the grant of equity or equity interests. Further, the settlement does not prohibit noncompete agreements in connection with the sale of a business, provided that individuals subject to restriction have a pre-existing equity interest in the business being sold. Notably, the settlement also bars employee agreements restricting employees from soliciting customers, except those current or prospective customers with whom the employee had “direct contact or personally provided service” in the last twelve months.

Focus on Healthcare Industry

Also on September 4, 2025, the FTC issued a comprehensive Request for Information (“RFI”) seeking public comment on the impact of noncompete agreements across all industries, but with a particular focus on the healthcare industry.  The RFI includes requests on how noncompetes have (i) affected wages and labor mobility for workers in the healthcare sector; (ii) made it more difficult to hire physicians, nurses and other professionals; and (iii) affected the provision of or competition within any specific healthcare service in a geographic area. The deadline to submit public comments to the RFI is November 3, 2025, and the FTC specifically requested information on employers, including their names and substantive terms of their noncompetes.

On September 10, 2025, Ferguson announced that the FTC had sent letters to several large healthcare employers and staffing firms urging them to conduct a comprehensive review of their employment agreements and to immediately discontinue noncompetes that are unfair or anticompetitive.  The letter highlights the healthcare and healthcare staffing sectors as specific areas in which “[a]vailable information suggests” that noncompete clauses “may unreasonably limit employment options for vital roles like nurses, physicians, and other medical professionals.”

The RFI, combined with the FTC’s action against Gateway Services, Inc. and warning letters issued to health care employers and staffing firms make clear the FTC’s increased scrutiny of non-competes will continue.  To mitigate FTC Act risks, it is advised that employers:

• only use noncompetes when an individual’s job responsibilities warrant this type of protection;
• clearly define reasonable limits in terms of geography, timeframe, and types of later employment;
• consider the use of less restrictive options, such as nondisclosure and nonsolicitation agreements and, where possible, use less restrictive alternatives; and
• where less restrictive alternatives are not sufficient, document why they are not adequate.

This advisory provides a general overview of recent FTC developments and is not intended as legal advice. If you have questions about these issues or how they may affect your organization, please contact Maureen Monaghan at 212-701-4112, or via email at MMonaghan@cullenllp.com, Brian Selchick at 518-788-9426, or via email at BSelchick@cullenllp.com, or Andrew P. Nitkewicz at 516-357-3895, or via email at ANitkewicz@cullenllp.com.