September 2025
The Federal Trade Commission (FTC) is continuing to focus on noncompete agreements in the healthcare sector after its previous attempt to impose a nationwide ban was vacated by federal courts in 2024. The FTC is now reviewing noncompetes on a case-by-case basis. To that end, on September 10, 2025, the FTC issued formal warning letters to several large healthcare employers and staffing companies regarding the use of noncompete agreements in employment contracts. A copy of the template for those letters can be found here.
In the letter, the FTC urges employers to conduct a comprehensive review of noncompete agreements, emphasizing that overbroad or unjustified noncompetes may violate Section 5 of the FTC Act (15 U.S.C. § 45). In broad terms, Section 5 prohibits what the FTC deems to be unfair methods of competition, including the use of noncompetes. The FTC believes that noncompetes in the healthcare sector can have an adverse effect on healthcare workers and patient access, especially in rural areas. The FTC encourages all employers, not just those who received letters, to review their noncompetes.
Details From the FTC Letter
The FTC’s template letter notes that many healthcare employers and staffing companies use noncompetes that may unreasonably limit employment options for critical roles such as nurses, physicians, and other medical professionals. The agency highlights the perceived harm in healthcare markets where noncompetes can restrict patient choice and access to care, especially in rural areas with limited medical resources.
The FTC observes that noncompetition agreements may be considered overbroad if they are excessive in duration, geographic scope, or if they apply to roles where such restrictions are not justified (e.g., lower-level or non-executive positions). Therefore, the FTC strongly encourages employers to:
- Conduct a comprehensive review of all employment agreements, including noncompetes and other restrictive covenants.
- Discontinue the use of any noncompetes that are unfair or anticompetitive under the FTC Act.
- Notify affected employees of the discontinuance of such agreements.
Recommendations for Employers
Healthcare employers and staffing companies should promptly review their employment contracts to ensure compliance with federal law and FTC guidance. Equally as important is to analyze noncompetition agreements under applicable state and local laws. Other pertinent considerations for employers:
- Tailoring Noncompetes: Noncompetes should be narrowly tailored so they are reasonable in duration, geographic scope, and applicable only where justified by legitimate business interests.
- Alternatives to Noncompetes: Healthcare employers should consider whether less restrictive alternatives (such as non-solicitation or confidentiality agreements) could achieve the same objectives without unduly restricting employee mobility.
- Documentation and Notification: If discontinuing noncompetes, employers should document the process and provide clear notification to affected employees.
Recent FTC Enforcement Action
In a press release issued on September 4, 2025, the FTC stated that it had reached a resolution in an enforcement action against Gateway Services Inc. Although it involved a non-healthcare related company, it is nonetheless instructive of the FTC’s posture to non-competition agreements. In that case, the FTC faulted Gateway for entering into noncompete agreements with almost all of its employees. The FTC deemed the agreements to be overbroad due to their nationwide scope and application to lower-level employees. The FTC stated in the press release that Gateway must, under the terms of a proposed consent order, immediately stop enforcing all existing noncompete agreements. The FTC further stated that as a result, nearly 1,800 employees will be freed from the restrictions with Gateway that limited their job mobility and ability to negotiate better wages and benefits. While this is perhaps an egregious example, it highlights the FTC’s careful focus on proper geographic limitations and the imposition of noncompetes on all employees regardless of any business justification for doing so.
Conclusion
The FTC’s warning letters and recent enforcement action underscore the agency’s focus on noncompetes in the healthcare and other sectors. Healthcare employers, in consultation with legal counsel, should take this opportunity to proactively review and, if necessary, revise their employment practices to mitigate legal risk and ensure compliance with FTC guidance, recent enforcement actions, and corresponding state and local laws.
If you have questions about how these developments may affect your organization, contact Frier Levitt to speak with a knowledgeable healthcare attorney.
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