Just one week after the Federal Trade Commission (FTC) ordered Gateway Services Inc. (Gateway), the nation’s largest pet cremation company, to cease enforcing non-compete agreements that bound nearly 1,800 workers, FTC Chairman Andrew Ferguson has taken another bold step. On September 10, the FTC issued warning letters to several major health care employers and staffing firms, urging them to review and revise their use of non-compete clauses. These back-to-back actions reflect a clear and intensifying focus by the FTC on rooting out anticompetitive employment practices that restrict worker mobility and suppress wages.

The Gateway Complaint

The Gateway case marked a significant milestone. The FTC alleged that Gateway imposed non-compete agreements on nearly all employees, from executives to hourly laborers, prohibiting them from working in the pet cremation industry anywhere in the U.S. for a year after leaving the company. The Commission found these agreements to be anticompetitive, limiting job mobility and deterring new market entrants.

In a joint statement on September 4, Chairman Ferguson and Commissioner Melissa Holyoak emphasized that the FTC is “working hard every day to marshal resources across the agency to uproot unfair and unreasonable employment agreements that drive down wages and reduce job mobility.”

Health Care Employers Now in Crosshairs

Building on that momentum, the FTC’s latest warning letters target health care organizations, an industry where non-compete agreements can have especially harmful effects.

The letters highlight concerns that such agreements may:

• Unreasonably restrict employment options for vital roles like nurses and physicians.
• Limit patient choice, particularly in rural areas where medical services are already stretched thin.
• Violate Section 5 of the FTC Act, which prohibits unfair methods of competition.

The FTC is not just issuing guidance to health care employers, it is signaling that enforcement may be imminent.

A Strategic Shift Post-Nationwide Ban

These actions come on the heels of the FTC’s decision to withdraw from defending the Biden-era nationwide non-compete ban, which was vacated by federal courts. Rather than pursuing a blanket prohibition, the FTC is now doubling down on targeted enforcement—case by case, industry by industry.

Chairman Ferguson made the agency’s position clear: “We will continue to patrol our markets for specific anticompetitive conduct that hurts American consumers and workers and take bad actors to court.”

What Employers Should Do Now

Health care organizations and employers in other sectors should treat these developments as a wake-up call. The FTC is actively investigating and issuing actions against employers for using broad non-compete agreements that lack a legitimate business justification.

Employers should take the following recommended steps:

• Consult legal counsel to assess risk exposure.
• Conduct a comprehensive audit of their employment agreements.
• Ensure non-competes are narrowly tailored and justified.
• Discontinue any agreements that are unfair or anticompetitive.
• Explore alternatives to non-competes that will still adequately protect your business interests.
• Notify employees if such agreements are rescinded.

The FTC’s recent actions against Gateway and its warning letters to health care employers mark a new chapter in labor market enforcement. The message is clear: non-compete agreements that unfairly restrict workers and harm competition will not be tolerated.

If you have questions regarding non-compete agreements or the FTC’s latest crackdown, please contact your UBG attorney or Chris Pickett at cpickett@ubglaw.com. 

The information provided in this client alert speaks only to the information and guidance we have available as of the date of publication and is subject to change. This legal update was created by UB Greensfelder LLP and is not intended as a substitute for professional legal advice. Receipt of this client alert, by itself, does not create an attorney-client relationship. For any questions, or for further information, please contact your UB Greensfelder attorney.