What happened. On September 10, 2025, the FTC announced it sent warning letters to a number of healthcare employers and staffing firms about potentially unlawful non-compete provisions, signaling the agency’s renewed focus on labor restraints in healthcare. The letters urge recipients to reassess existing contracts and warn that the FTC may open investigations if provisions are overbroad or unfair.
Case-by-case enforcement is the plan. Just days earlier, the Commission voted 3-1 to drop its appeals and “accede to vacatur” of its nationwide Noncompete Rule, which has been enjoined since August 2024. The agency underscored that, even without a rule, it will pursue individual matters under Section 5 of the FTC Act, which prohibits “unfair methods of competition.” Expect investigations and settlements rather than a one-size-fits-all federal ban.
A fresh consent order shows the template. On September 4, 2025, the FTC ordered Gateway Services, the nation’s largest pet cremation company, to stop enforcing non-compete agreements covering roughly 1,800 workers. Although outside traditional provider settings, the case highlights the kinds of features the FTC is targeting (broad restrictions imposed on non-executive employees) and foreshadows scrutiny of similar terms in healthcare and staffing.
A closer look at Section 5. With the nationwide rule off the table, Section 5 has become the FTC’s primary weapon in non-compete cases. Key points:
- Breadth of authority. Section 5 extends beyond traditional antitrust laws like Sherman Act § 1 (which requires proof of an agreement among competitors) or § 2 (which requires monopoly power). It gives the FTC independent authority to challenge conduct it deems “unfair” to competition, even if it doesn’t neatly fit into classic antitrust frameworks.
- Labor market emphasis. The Commission has emphasized that restrictions that chill employee mobility or suppress wages may qualify as “unfair methods of competition.” Healthcare, with its reliance on specialized staff and staffing agencies, is a natural target.
- Case-by-case discretion. Because Section 5 is a broad, standards-based provision, the FTC can choose fact patterns that illustrate its enforcement priorities. Warning letters and settlements are designed to set de facto standards, even without formal rulemaking.
- Judicial oversight. While Section 5 challenges are subject to judicial review, the agency can generate substantial compliance pressure through investigations, consent decrees, and the reputational risks of being named in a public enforcement action.
What this means for healthcare:
- Broader labor-market scrutiny. The letters went to both providers and staffing companies, reflecting concern about restraints that limit worker mobility (e.g., physicians, nurses, techs, travelers/locums).
- No rule, but plenty of leverage. With the rule’s appeal dropped, the FTC retains its Section 5 toolset and can pair it with coordinated efforts by DOJ and state enforcers, especially where restraints affect prices, quality, or access to care. States also continue to narrow what is permissible under healthcare non-compete agreements.
- A paper trail is forming. The FTC published a warning-letter template that spells out its theory and the expectation that companies promptly remediate problematic terms, handy insight into how future inquiries may look.
Practical steps healthcare entities can take to mitigate antitrust risk:
- Inventory and triage. Map where non-compete agreements, non-solicits, no-hire clauses, moonlighting limits, and training-repayment agreements (TRAPs) appear (including recruiter and staffing contracts). Flag those that bind non-executive roles or use long geographic/time scopes.
- Narrow and justify. Where a restraint is truly needed, limit it to what’s necessary to protect identifiable interests (e.g., confidential information, high-touch referral lines), with tailored durations and scope. Avoid blanket, system-wide bans.
- Prefer lighter-touch alternatives. Replace many non-compete agreements with NDAs, targeted non-solicit/no-raiding provisions, garden-leave for certain senior roles, and robust confidentiality/on-exit access controls.
- Harmonize with state law. A number of states have recently restricted healthcare non-compete agreements or set salary thresholds/notice requirements. Align templates system-wide; keep a 50-state tracker current for physician, APP, and nursing roles.
- Be investigation-ready. Designate an owner (legal/HR) to respond if an FTC letter arrives, pre-draft remediation options, train recruiters and line managers not to over-promise or imply prohibitions that go beyond written policy, and ensure rapid privilege review of legacy forms.
Bottom line. The FTC’s nationwide non-compete rule is shelved, but enforcement is not. The FTC is pivoting to targeted Section 5 cases, starting with healthcare and staffing. Now is the moment to tighten templates, narrow scopes, and document necessity, so your employment restraints protect legitimate interests without drawing a Section 5 challenge.
