The Federal Trade Commission recently stepped up pressure on the healthcare sector, sending letters to major employers and staffing firms urging them to review their use of noncompete and other restrictive employment agreements.

Regulators warn that overly broad restrictions on nurses, physicians, and other medical professionals limit worker mobility and reduce patient choice, especially in rural areas.

The FTC emphasized that enforcement against unreasonable noncompete clauses remains a top priority under its competition mandate.

Judicial limits on the Commission

The FTC’s effort to impose a nationwide ban on noncompetes has been checked in the courts. In August, Judge Ada Brown of the Northern District of Texas struck down the rule, finding that the agency had exceeded its statutory authority.

The regulation, which was to take effect on September 4, would have prohibited almost all noncompete agreements with workers, while allowing existing covenants with senior executives to remain in force.

Business groups including the Chamber of Commerce and the Business Roundtable supported the challenge, arguing that Congress never intended the FTC to wield such expansive powers.

The setback highlights the unsettled legal landscape. A federal judge in Florida also questioned the validity of the rule, while a Philadelphia court upheld the FTC’s reasoning that noncompetes are rarely justified.

“Enforcement against unreasonable noncompete agreements remains a top priority for the Federal Trade Commission.”

Kelse Moen, Deputy Director of the Bureau of Competition

The Commission estimates that one in five American workers, about 30 million people, is bound by these contracts, which it says depress wages and block entrepreneurship. Its economists project that eliminating noncompetes could raise wages by nearly 300 billion dollars per year and create more than 8,000 new businesses.

For now, the ban has been vacated and noncompetes remain primarily subject to state law, which varies widely.

From rulemaking to casework

The FTC’s warning letters to major healthcare employers this week follow swiftly on the heels of the Commission’s decision to withdraw from defending its nationwide noncompete ban.

Having conceded in court that it lacked statutory authority to impose a sweeping prohibition, the agency shifted its strategy.

Rather than pursue a rule now vacated, Chair Andrew N. Ferguson vowed to police restrictive covenants through traditional antitrust enforcement: patrolling specific markets, challenging overbroad agreements, and taking employers to court where necessary.

This pivot underscores a deliberate recalibration: retreat from contested rulemaking, but renewed vigor in case-by-case scrutiny.

For workers, particularly in healthcare, the shift means noncompetes will not vanish by fiat, but unreasonable restrictions may still face close and costly examination.

Letters as warning shots

The FTC’s letters to healthcare employers are both a signal and a safeguard.

They outline the Commission’s authority under Section 5 of the FTC Act, remind recipients that restrictive covenants can be unlawful if overbroad, and press companies to review contracts before enforcement action follows.

The correspondence points to particular risks in healthcare, where such restraints limit the mobility of professionals and reduce patient choice, with rural communities identified as especially vulnerable.

The letters stop short of alleging immediate misconduct but are clear that unfair or anticompetitive covenants should be discontinued at once and that employees must be informed of the change.

They stress that alternatives exist (for example, narrower limits in time or geography) and that the Commission is focusing resources on healthcare markets. By circulating the notices broadly, the FTC aims to influence contracting practices across the sector and signal that scrutiny is intensifying.

“Enforcement against unreasonable noncompete agreements remains a top priority for the Federal Trade Commission,” said Kelse Moen, Deputy Director of the Bureau of Competition and co-chair of the agency’s Joint Labor Task Force. “We strongly encourage all employers—not just those receiving letters today—to review their contracts closely, to ensure that any restrictions on employee mobility are in full compliance with the law.”

Broader picture

The Chair’s letter sits within a wider campaign to rein in noncompete clauses across the American labor market.

Earlier this month the FTC launched a public inquiry seeking evidence on the scope and effects of noncompete agreements, inviting workers, former employees, and even rival employers to submit comments. The consultation is designed to build an evidentiary record that can guide future enforcement priorities.

The agency has already shown a willingness to act decisively.

In August it ordered the nation’s largest pet cremation company to abandon its noncompete restrictions, a move that freed nearly 1,800 workers from contractual restraints.

Officials stress that while narrowly drawn covenants may sometimes be justified, overbroad restrictions have become pervasive and are undermining competition in local labor markets.

The inquiry, coupled with enforcement actions, illustrates the FTC’s intent to pair public engagement with targeted litigation in order to reshape employment practices sector by sector.