Enhanced Crackdown on Non-Compete Agreements
By Kimberly J. Ruppel
Chair, Healthcare Litigation Task Force
Dickinson Wright PLLC
Original Publish Date: September 30, 2025
It has been a busy year for the Federal Trade Commission’s ("FTC") enforcement efforts against non-compete restrictive covenants in employment agreements. During President Biden’s administration in 2024, the FTC issued a rule banning non-compete provisions in employment agreements with certain exceptions (the "Rule"). That led to immediate litigation challenging the FTC's authority. Appeals were pending in two federal Circuits until early September of this year, at which time the FTC voluntarily withdrew both appeals, acknowledging the over-breadth of the Rule. In doing so, the Trump administration's FTC Chairman, Andrew Ferguson, indicated that the FTC would continue its enforcement actions on a case-by-case basis.
This statement was emphasized by simultaneously filing an administrative complaint against a national pet cremation company to prevent enforcement of non-compete provisions in nearly 1,800 employees' contracts. Those agreements restricted employees from working in the industry anywhere in the country for one year after separating from the employer, regardless of position or responsibilities. Thus, hourly workers had the same restrictions as highly compensated executives.
According to the complaint, the employer (Gateway Services) is the largest pet cremation business in the United States, with over 100 locations servicing 17,000 veterinary clinic nationwide. The FTC alleged the non-compete provisions are anticompetitive for unfairly altering bargaining positions between employer and employee. In addition, the FTC alleged the restrictions suppress competition by impeding the entry or expansion of competing businesses in the industry as well as discouraging employees from opening competing businesses. A consent order was proposed by the FTC, which provides in part that the employer is prohibited from enforcing the non-competes, the employer must notify employees they are no longer subject to a non-compete, and limits non-solicitation of customers to those with whom the employee had direct contact or provided service in the last 12 months of employment. A final disposition is pending.
At the same time, the FTC launched a public inquiry, seeking information on the scope, prevalence and effects of employment non-compete agreements in order to gather information for possible future enforcement actions. The FTC is seeking information such as whether workers are avoiding seeking or turning down new job opportunities, or taking a position with lower pay or worse conditions to avoid violating the terms of a non-compete. The FTC is also asking for information as to whether workers or business owners have incurred legal costs to address a former employer’s attempts to enforce a non-compete agreement.
The FTC is most concerned with restraints on workers preventing them from moving to better jobs, impeding new business formation, preventing a shift of labor to markets needing workers, and harming rival employers' legitimate competitive interests. The latter factor is of particular concern in the healthcare sector where non-compete agreements limit employment options for healthcare providers, thus restricting patients' choice of who is available to provide their medical care, especially in rural areas where medical services are already stretched thin.
Also in September, the FTC issued warning letters to an undisclosed list of healthcare employers and staffing companies recommending review of non-compete provisions in employment agreements. Chairman Ferguson cautioned employers to consider whether non-competes are necessary, and whether less restrictive terms may achieve the same purpose. Employers were advised to evaluate whether non-compete terms may be overbroad in duration or geographic scope, or if the restriction is inappropriate for certain roles. For example, the FTC would likely be more critical of a non-compete agreement for an hourly wage earner with limited skills, as in the Gateway matter. In contrast, a non-compete agreement with a highly trained and highly paid executive level employee who is involved in the employer’s strategic planning and business development might not be as heavily scrutinized.
If you received such a letter, consider alternatives for protecting sensitive and confidential company information and investment in personnel. Some options include the use of non-solicitation, non-disclosure, or confidentiality agreements that are tailored to the employee’s role. Clearly defining the employer's legitimate business interest in proprietary information is recommended as a best practice. If an employee is offered specialized training, consider requiring reimbursement of the expense within a certain timeframe of the employee’s departure. Another option is a "garden leave" agreement, essentially continuing paid employment for a period of time without requiring the employee to actively work. Tailoring a non-compete or similar provision according to the FTC’s guidance may help to avoid governmental enforcement action as well as private litigation.
The FTC has also signaled its increased emphasis on pursuing enforcement activity against non-compete agreements, with the appointment of Emma Mittelstaedt Burnham as Associate Director for Healthcare in the Bureau of Competition. Ms. Burnham hails from the Department of Justice's antitrust division, with significant experience in investigating and prosecuting antitrust violations in the healthcare sector.
In addition to federal enforcement activity, many states have enacted legislation in recent years limiting or outright banning the use of non-compete provisions. States including Colorado, Indiana, Kentucky, Louisiana, Maryland, Pennsylvania, Tennessee and Texas have enacted laws limiting or prohibiting non-competes specifically for healthcare professionals. In contrast, Florida recently expanded all employers' ability to enforce certain high earning workers' non-compete agreements, creating a presumption of enforceability up to four years. Be sure to consult your attorney for the latest developments in your jurisdiction.
About the Author:
Kimberly Ruppel is Chair of Dickinson Wright, PLLC’s Healthcare Litigation Task Force. Kim has over 25 years' experience as a commercial litigator who represents healthcare providers, insurers and benefit plans in healthcare contract litigations, licensing and regulatory disputes, governmental fraud and abuse investigations, HIPAA compliance counseling, and insurance claims and coverage disputes.