FTC Signals Shift To Targeted Enforcement Of Non-Competes In The Healthcare Industry

Earlier this Fall, the Federal Trade Commission (the "Commission" or the "FTC") officially ceded its fight to impose a nationwide ban on employee noncompete agreements (the "Noncompete Ban").

Originally championed in May 2024 under the Biden administration, the Ban would have prohibited most employers from entering into or enforcing noncompete agreements against their employees, declaring them an "unfair method of competition" under Section 5 of the FTC Act.¹ The Ban was met with swift opposition, and in August 2024, the Northern District of Texas struck it down, finding the FTC lacked clear statutory authority.² The Commission appealed that ruling to multiple federal appellate courts³ – but the fight is over.

The FTC, now operating under the Trump administration, "acceded to the vacatur," meaning that it will no longer defend the Ban or pursue its appeals. In a joint statement, Chairman Andrew N. Ferguson and Commissioner Melissa Holyoak described the Ban's illegality as "patently obvious," citing the absence of clear congressional authorization and the Ban's sweeping scope. Thus, as a practical matter, the Noncompete Ban is dead.

However, the Commission's interest in noncompete restrictions is very much alive. Rather than pursuing sweeping rulemaking, the FTC is pivoting to targeted enforcement – evaluating noncompete agreements on a case-by-case basis, with a particular focus on industries where such restrictions may harm consumers or competition. The healthcare sector is at the top of that list.

As Chairman Ferguson put it, the FTC remains committed to "vigorously pursu[ing] firms using practices that harm competition," noting that the administration's priority is to "deliver transparent, competitive, and fair healthcare markets."

This resolve was on display just days later. On September 10, the FTC issued warning letters to several large healthcare employers and staffing firms, urging (if not requiring) them to conduct a comprehensive review of their employment agreements – including any noncompete agreements or other restrictive covenants – for compliance with applicable law. The letters warned that such restrictions may have "particularly harmful effects" in healthcare markets, where they can limit patient choice.

This renewed enforcement push aligns with a wave of recent state-level reforms tightening noncompete rules for healthcare professionals. While several states already restricted physician and healthcare provider non-competes,⁴ since early 2025, that group has proliferated, with additional eight states – Arkansas, Louisiana, Maryland, Pennsylvania, Utah, Texas, Indiana, and Wyoming – enacting new restrictions:

• Arkansas: Fully bans physician noncompete agreements.
• Indiana: Bars physician noncompete agreements between doctors and hospitals or their affiliated entities.
• Louisiana: Caps physician noncompete agreements at three years for primary care providers, and five years for specialists, with strict geographic limits.
• Maryland: Prohibits noncompete agreements for healthcare workers earning $350,000 or less annually, and limits higher-earning provider restrictions at one year and 10 miles.
• Pennsylvania: Restricts medical practitioner noncompete agreements to one year and requires patient notification upon practitioner's departure.
• Texas: Limits physician noncompete agreements to one year and five miles, with mandatory buy-out provisions capped at one year's salary.
• Utah: Bans digital healthcare platforms from imposing noncompete agreements on independent contractors.
• Wyoming: Voids all noncompete agreements unless tied to a business sale, trade-secret protection, or executive-level employment.

The FTC's focus is not limited to healthcare. Other industries, too, are subject to the Commission's selective and heightened scrutiny. For instance, in August 2025, the FTC filed a complaint against Gateway Services, Inc. and its subsidiary – a national pet cremation company. The complaint alleges Gateway required all employees, from hourly workers to executives, to sign sweeping noncompete agreements prohibiting employment in the pet cremation industry anywhere in the United States for one year after separation. The FTC's proposed consent order would rescind all existing Gateway noncompete agreements and prohibit similar restrictions going forward, underscoring the FTC's continued willingness to police "unfair methods of competition" even after abandoning its nationwide Ban.

Thus, while the FTC has laid the Noncompete Ban to rest, the agency's scrutiny of restrictive covenants continues – with litigation, not regulation, as its tool of choice. Employers should treat this moment as a recalibration, not a reprieve. In light of the FTC's shift to case-specific enforcement, and the patchwork of state laws concerning healthcare provider non-competes, employers should:

• Expect Targeted Enforcement: The FTC is likely to pursue agreements it views as overly broad or anticompetitive, particularly in healthcare, technology, and service sectors.
• Audit Agreements: Review all restrictive covenants for compliance with current federal and state law.
• Tailor Restrictions: Ensure each restriction is proportionate in time, geography, and subject matter, and supported by a legitimate business interest.
• Consider Alternatives: Where possible, use confidentiality or non-solicitation agreements instead of broad post-employment noncompete agreements.
• Consult Legal Counsel: A Sheppard Mullin Labor and Employment attorney can help navigate the evolving patchwork of federal and state noncompete laws, including in the healthcare industry.

Footnotes

1 See Federal Trade Commission, Non-Compete Clause Rule, 89 Fed. Reg. 38342 (May 7, 2024).

2 See Ryan, LLC v. Fed. Trade Comm'n, 746 F. Supp. 3d 369 (N.D. Tex. 2024).

3 See Ryan, LLC v. Federal Trade Commission, No. 24-10951 (5th Cir.); Properties of the Villages, Inc. v. Federal Trade Commission, No. 24-13102 (11th Cir.).

4 These states include Colorado, Connecticut, Delaware, the District of Columbia, Florida, Illinois, Iowa, Kentucky, Massachusetts, Montana, New Hampshire, New Jersey, New Mexico, Rhode Island, South Dakota, Tennessee, and West Virginia.

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