FTC Withdraws Non-Compete Rule – With Increased Scrutiny of Health Care Non-Competes
As previously reported in our 2024 blog post, the Federal Trade Commission (FTC) issued a Final Rule banning non-compete clauses between workers and employers, subject to a few narrow exceptions. The Final Rule which was scheduled to take effect on Sept. 4, 2024, faced numerous court challenges and was ultimately subject to a nationwide injunction issued by Judge Ada Brown in the Northern District of Texas [Ryan, LLC v. FTC (5th Cir.]. The FTC appealed the Aug. 20, 2024, Texas Court decision and the preliminary injunction issued in Properties of the Villages, Inc. v. FTC (11th Cir.). However, on Sept. 4, 2025, after prolonged litigation, the FTC announced that it would drop its pending appeals in both cases. The FTC, however, has far from abandoned its scrutiny of non-compete clauses. While the FTC federal nationwide ban on non-compete clauses is dead, the FTC is addressing non-compete clauses on case-by-case enforcement actions under Section 5 of the FTC Act. This strategy should come as no surprise – this is exactly the approach the FTC indicated it would take following the Texas Court decision.
Operating under the Section 5 enforcement strategy, the FTC pursued an enforcement action against Gateway Pet Memorial Services. The FTC alleged that Gateway’s utilization of non-compete clauses for nearly all employees barring them from working in the pet cremation industry anywhere in the United States for a period of one year after leaving the company was unfair and anticompetitive in violation of Section 5. In September 2025, the FTC announced a proposed settlement consent order, which was open to public comment, prohibiting Gateway from entering, maintaining or enforcing its non-compete agreements, with limited exceptions. Gateway is required to notify all affected employees that the non-compete clauses are void and not subject to enforcement.
On Sept. 10, 2025, the FTC also put the healthcare industry on alert when it issued warning letters to large healthcare and staffing employers urging them to review and potentially discontinue problematic non-compete clauses. The warning letters stated that “… many healthcare employers and staffing companies include noncompete agreements… in employment contracts… [n]oncompetes may have particularly harmful effects in healthcare markets where they can restrict patients’ choices of who provides their medical care – including, critically, in rural areas where medical services are already stretched thin.” The FTC’s website states that “the purpose of FTC warning letters is to warn companies that their conduct is likely unlawful and that they can face serious legal consequences, such as a federal lawsuit, if they do not immediately stop.” Despite this posted statement, the FTC indicated that receipt of the warning letter was not intended to suggest the company receiving the letter had engaged in illegal conduct. On Dec. 10, 2025, Modern Healthcare reported the following for-profit health systems and staffing companies received a warning letter: HCA Healthcare, Universal Health Services, Tenet Healthcare, AMN Healthcare, Amergis Healthcare Staffing, Ardent Health, CHG Healthcare, Encompass Health, Enhabit Home Health & Hospice, Envision Healthcare, Ingenovis Health, Jackson Healthcare, Lifepoint Health, Medical Solutions, Prime Healthcare, Scion Health, Select Medical, Soliant Health, TeamHealth, and Triage Staffing.
While the FTC has abandoned the nationwide blanket ban on non-compete clauses, it has followed through on its promise to continue scrutiny of non-compete clauses following a case-by-case approach under Section 5 of the Act. The warning letters sent to healthcare and staffing companies should put all those in the healthcare sector on alert. It is also imperative to pay attention to state specific laws. As previously reported, Pennsylvania and other states have implemented laws banning or restricting non-compete clauses. Currently, 4 states maintain a near complete ban on non-compete agreements: California, Minnesota, North Dakota, and Oklahoma.
If you have any questions about the FTC warning letters or any other legal matter, please email Sophia B. Villani, Esq., at sbvillani@norris-law.com or call her at (917) 369-8883.
About the Author- The Legal Diagnosis
Sophia B. Villani is an Associate in the Firm’s New York office, where she works on health care and life sciences matters.
Sophia was previously a Non-Equity Partner at a public entity firm, where she specialized in coverage and monitoring counsel to insurance and reinsurance underwriters with a focus on healthcare business, including hospital, physician, allied health, and long-term care programs. In addition, she drafted and negotiated insurance policy provisions, service level agreements, settlement agreements, and fee-sharing agreements.
As a healthcare coverage and risk assessor, Sophia supports clients throughout the U.S. during the pre-underwriting phase. Her experience includes managing large and diverse healthcare programs with high exposure liabilities and complex coverage issues.