{"id":92602,"date":"2025-09-18T11:47:39","date_gmt":"2025-09-18T16:47:39","guid":{"rendered":"https:\/\/www.mcguirewoods.com\/?post_type=insight&p=92602"},"modified":"2025-09-18T11:47:42","modified_gmt":"2025-09-18T16:47:42","slug":"ftc-employer-employee-noncompete-warning-letters-must-knows-for-healthcare-employers-and-staffing-firms","status":"publish","type":"insight","link":"https:\/\/www.mcguirewoods.com\/client-resources\/alerts\/2025\/9\/ftc-employer-employee-noncompete-warning-letters-must-knows-for-healthcare-employers-and-staffing-firms\/","title":{"rendered":"FTC Employer-Employee Noncompete Warning Letters: Must-Knows for Healthcare Employers and Staffing Firms"},"content":{"rendered":"\n

On Sept. 10, 2025, the FTC announced<\/a> the issuance of warning letters to large healthcare employers and staffing firms concerning the use of noncompete clauses in employer-employee contracts. In the warning letters, FTC Chairman Andrew Ferguson encourages employers and firms to (i) review employment agreements containing noncompete provisions and other restrictive covenants to ensure compliance with applicable law; (ii) discontinue the use of provisions that are anticompetitive; and (iii) give appropriate notice to employees of any relevant changes to the scope of these clauses. In public remarks on Sept. 16, 2025, Chairman Ferguson went further, stating that if companies did not heed the FTC\u2019s warnings against anticompetitive noncompetes, they were \u201cprobably going to get [civil investigative demands] from the FTC,\u201d and he would be \u201chappy to litigate these cases.\u201d<\/p>\n\n\n\n

The issuance of warning letters is part of the FTC\u2019s shift<\/a> in its approach to reducing competitive harm from problematic noncompetes. The FTC has moved from a rule-based approach to bringing individualized enforcement actions. The FTC\u2019s request for information<\/a> (RFI) on the impacts of noncompete clauses in employer-employee contracts invited the public to name employers utilizing noncompete agreements \u2014 specifically calling out healthcare employers \u2014 that could be considered anticompetitive. More warning letters may be issued as a result of those submissions.<\/p>\n\n\n\n

These announcements have significant implications for the healthcare industry. This alert outlines key takeaways healthcare operators, providers and investors should understand from the FTC\u2019s recent warning letters and RFI.<\/p>\n\n\n\n

1. Warning Letters Demonstrate FTC\u2019s Continued Focus on Noncompete Clauses and Other Restrictions Affecting Employees in Employment Contracts in the Healthcare and Healthcare Staffing Sectors<\/h6>\n\n\n\n

In a template warning letter shared as part of the Sept. 10, 2025 announcement, Chairman Ferguson acknowledges that while \u201cnarrowly tailored noncompetes can serve valid purposes in certain circumstances, available evidence indicates that in practice many employers impose noncompetes without due consideration to whether they are necessary and appropriate under the circumstances, including whether less restrictive alternative contract terms may sufficiently achieve the same procompetitive purposes.\u201d Citing overbreadth with respect to duration or geographic scope as examples of how a provision may violate the law, Chairman Ferguson posited that noncompete clauses \u201cmay be inappropriate for certain roles entirely.\u201d<\/p>\n\n\n\n

The letter highlights the healthcare and healthcare staffing sectors as specific areas in which \u201c[a]vailable information suggests\u201d that noncompete clauses \u201cmay unreasonably limit employment options for vital roles like nurses, physicians, and other medical professionals.\u201d The template letter does not specify the source of this information, but it may be drawn from confidential investigations of particular companies or conduct or from a 2023 FTC request for public comment regarding the effects of noncompete clauses. Many of the 25,000-plus comments submitted during the public comment process came from healthcare workers or others affected by restrictions on healthcare workers and can be read to support Chairman Ferguson\u2019s statement that the FTC sees \u201cparticularly harmful effects in healthcare markets\u201d where noncompete clauses \u201ccan restrict patients\u2019 choices of who provides their medical care \u2014 including, critically, in rural areas where medical services are already stretched thin.\u201d<\/p>\n\n\n\n

2. Action Steps for Warning Letter Recipients<\/strong><\/h6>\n\n\n\n

Large healthcare employers and staffing firms should take steps to prepare for a warning letter.<\/p>\n\n\n\n

A. Make sure the company has an effective system for recognizing and escalating a warning letter.<\/strong><\/p>\n\n\n\n

Healthcare and staffing companies should remain vigilant in monitoring for FTC correspondence over the next several months. The FTC\u2019s RFI process will move forward into November 2025, and submissions that identify employers using allegedly anticompetitive noncompete clauses can be made confidentially. Employers can monitor the RFI website to see if they are mentioned in public submissions, but they will not know if they are the subject of a confidential submission and therefore more likely to receive a warning letter. This process increases the need to be on the lookout for warning letters.<\/p>\n\n\n\n

A key risk is that a warning letter could be received in a general mailbox or one designed for press\/public inquiries and not get promptly escalated to organizational leadership. Employers should implement clear protocols to ensure all staff are educated on the importance of immediately forwarding any government communications to the legal department or compliance team so that a warning letter or inquiry can be addressed without delay.<\/p>\n\n\n\n

B. Proactively identify qualified antitrust, employment and healthcare business counsel to advise on risk and next steps. <\/strong><\/p>\n\n\n\n

In the template letter, Chairman Ferguson \u201cencourages\u201d recipient companies to conduct \u201ca comprehensive review\u201d of their employment agreements to determine whether the noncompete and other restrictive provisions affecting employees are in compliance with Section 5 of the FTC Act, as well as other relevant laws, and whether they are otherwise \u201cappropriately tailored to the circumstances.\u201d While the template letter notes it is not intended to suggest an employer has engaged in illegal conduct, a prudent first step is to identify qualified counsel who can determine if the company\u2019s noncompete and other employee-focused restrictive covenants are generally consistent with state and federal laws.<\/p>\n\n\n\n

Depending on that determination, a follow-on process may involve legal review of a company\u2019s employment agreements to identify whether the temporal and geographic scope is appropriate and reasonably tailored to serve legitimate business purposes; whether the provisions are appropriately tailored for each role to which they are applied; whether there are less restrictive tools such as nondisclosure provisions that could serve the same purposes without limiting employee mobility; and how the existing clauses compare to provisions that courts and the FTC have found to be improper.<\/p>\n\n\n\n

C. As necessary, revise noncompete provisions that may be perceived as anticompetitive to avoid FTC, state enforcement or private litigation risk.<\/strong><\/p>\n\n\n\n

In many instances, counsel will be in a position to suggest changes to noncompete provisions in employment contracts that will continue to serve important business interests while conforming to federal and state law. The FTC acknowledged that noncompete provisions that are reasonably tailored and sufficiently narrow to avoid imposing overbroad restrictions on employees are appropriate and legally defensible. Therefore, companies should not abandon noncompete provisions entirely, but they should take a case-by-case approach in determining whether the provisions are useful and merited, mirroring the FTC\u2019s approach to evaluating noncompetes.<\/p>\n\n\n\n

D. Assess the impact of discontinuing noncompete provisions and a strategy for communicating to employees.<\/strong><\/p>\n\n\n\n

In the template letter, Chairman Ferguson \u201cstrongly encourages\u201d any company that finds its contracts are at odds with the FTC Act to \u201cdiscontinue them immediately and to notify relevant employees of the discontinuance.\u201d If a company removes or narrows noncompete clauses, it should have an effective communication strategy developed by antitrust and employment counsel for announcing the changes in a way that clearly explains the company\u2019s position and takes account of legal risk that the announcement be viewed as an admission of prior anticompetitive conduct. Minimizing misunderstandings and avoiding disruption among employee ranks will be critical to the success of changes in this area.<\/p>\n\n\n\n

E. Understand the consequences of taking no action and the value of being proactive.<\/strong><\/p>\n\n\n\n

Proactively taking steps to assess the company\u2019s risk of having the FTC, a state attorney general or a private plaintiff take issue with noncompete clauses in employment contracts is a productive use of resources, whether or not the company has received a warning letter. With respect to the FTC specifically, failure to reform these provisions can result in a formal enforcement action, which is considerably more expensive, burdensome and reputationally fraught than resolving issues on the front end, quietly and on the company\u2019s own terms. As noted above, Chairman Ferguson stated that companies that do not heed the FTC\u2019s warnings against anticompetitive noncompetes were \u201cprobably going to get [civil investigative demands] from the FTC,\u201d and that he was \u201cmore than happy to litigate these cases.\u201d<\/p>\n\n\n\n

An example of an FTC enforcement action in this space is a complaint<\/a> filed against a pet cremation company and accompanying consent order entered into on Sept. 4, 2025. The FTC alleged that the company required nearly all new employees, from executives to hourly workers, to sign 12-month post-employment noncompetes that barred them from working anywhere in the United States in the pet cremation industry. The FTC found these restrictions overly broad and used in a manner that suggested a specific intent to harm competition, quoting from internal communications among company leaders in the complaint. If approved, the final order<\/a> will require the company to discontinue use of noncompete provisions for 10 years; provide notice to current and future employees regarding the discontinuation of noncompete provisions for 10 years; provide routine compliance reports for 10 years; and retain documents and allow the FTC access to information related to the company\u2019s compliance.<\/p>\n\n\n\n

Noncompete provisions may become the object of FTC scrutiny in several ways \u2014 whether in the context of receiving a warning letter that morphs into an investigation, through employee complaints or when documents are reviewed by the FTC in the course of a merger investigation in which the labor effects of a transaction attract attention of the regulators. By proactively reviewing and reforming these provisions, and by providing consistent training and sound guidelines to legal, contracting and HR teams on how to avoid potentially problematic noncompete provisions and other restrictive covenants, companies may be able to head off the distraction and negative publicity associated with an enforcement action.<\/p>\n\n\n\n

3. Warning Letters Are Part of Broader Update to FTC Noncompete Enforcement Strategy<\/h6>\n\n\n\n

The Sept. 10 announcement and ensuing warning letters follow a flurry of activity concerning noncompetes at the FTC. On Sept. 4, 2025, the FTC voluntarily dismissed its appeal of the Texas federal court decision that set aside<\/a> the FTC\u2019s 2024 final rule aimed at broadly banning noncompetes nationwide. Of note, the FTC\u2019s 2024 final rule generated considerable interest in the healthcare industry<\/a>, which \u2014 as noted above \u2014 submitted many comments and examples the FTC cited in support of the rule. Healthcare trade associations were divided, with some supporting and others opposing the rule. Healthcare appeared to be a major catalyst for the rule, but this development likely signals the end of the noncompete ban. Despite dismissing the appeal, the FTC has now indicated a shift toward enforcing noncompete restrictions on a more individualized basis and likely will continue a focus on employers in the healthcare industry.<\/p>\n\n\n\n

As referenced above, and discussed in more detail in a recent McGuireWoods alert<\/a>, the FTC also issued an RFI seeking public comment on the impact of noncompete agreements with a focus on the healthcare industry. The RFI includes requests on how noncompetes have (i) affected wages and labor mobility for workers in the healthcare sector; (ii) made it more difficult to hire physicians, nurses and other professionals; and (iii) affected the provision of or competition within any specific healthcare service in a geographic area. The deadline to submit public comments to the RFI is Nov. 3, 2025, and the FTC specifically requested information on employers, including their names and substantive terms of their noncompetes. While the FTC permits private, nonpublic disclosures, most submissions are expected to become public, which could make detailed noncompete terms widely accessible to others in the healthcare space, including competitors. Employers should monitor public disclosures and assess whether to proactively engage with the FTC or take other protective measures if they are named.<\/p>\n\n\n\n

\n\n\n\n

McGuireWoods will continue to publish guidance related to the FTC\u2019s recent enforcement actions. For questions related to noncompetes, the RFI or managing enforcement risk, contact one of the authors.<\/p>\n","protected":false},"excerpt":{"rendered":"

On Sept. 10, 2025, the FTC announced the issuance of warning letters to large healthcare employers and staffing firms concerning the use of noncompete clauses in employer-employee contracts. 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