It has been a busy month for the Federal Trade Commission (“FTC”) and enforcement activity concerning non-compete restrictive covenants in employment agreements. If you have been following this topic, you’ll recall that during President Biden’s administration in 2024, the FTC issued a rule banning non-compete provisions in employment agreements with certain exceptions.
That led to immediate litigation, challenging the FTC’s authority to implement such a rule. Appeals were pending in two federal Circuits until early September of this year, at which time the FTC voluntarily withdrew both appeals. In doing so, the FTC Chair 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 employee contracts. 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. Public comments will be collected until November 3, 2025.
Days later, the FTC issued warning letters to an undisclosed list of healthcare employers and staffing companies recommending review of non-compete provisions in employment agreements. Some options include the use of non-solicitation, non-disclosure, or confidentiality agreements, or “garden leave” agreements, essentially continuing paid employment for a period of time without requiring the employee to actively work.
The FTC has clearly signaled its increased emphasis on pursuing enforcement activity against non-compete agreements. Indeed, just this month, the FTC appointed Emma Mittelstaedt Burnham as Associate Director for Healthcare in the Bureau of Competition, who hails from the Department of Justice’s antitrust division, with significant experience in investigating and prosecuting antitrust violations in the healthcare sector.
In addition, many states have enacted legislation in recent years limiting or outright banning the use of non-compete provisions. Be sure to consult your attorney for the latest developments in your jurisdiction.
Click here for to view the noncompete warning letter template.
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