FTC Will Challenge Noncompetes on a Case-by-Case Basis

The following article first appeared in the Publications section of Wiggin and Dana’s website. It is reposted here with permission.

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The Federal Trade Commission recently announced two important changes affecting how it will address noncompete agreements and covenants.

One is the dismissal by the FTC of its noncompete rule, thus ending the agency’s attempt to seek judicial review of two decisions that held both the trade regulation process as well as the substance of the rule flawed.

The second is the initiative by the FTC to aggressively challenge noncompete agreements on a case-by-case basis.

Changes to Approaching Noncompete Issues

Last year, the FTC voted to issue the Noncompete Clause Rule—an expansive rule generally prohibiting employers from entering into and enforcing noncompete agreements with their employees, independent contractors, interns, volunteers, and apprentices, subject to certain exceptions.

The noncompete rule, which was promulgated under the leadership of former chair Lina Khan, stemmed from the FTC’s increased scrutiny under the prior administration regarding the effects of noncompetes.

The rule was subsequently enjoined by federal district courts in Texas and Florida before taking effect, which decisions the FTC appealed.

The FTC withdrew its notices of appeal in both cases, effectively ending the agency’s efforts to revive the rule.

On Sept. 5, 2025, the FTC withdrew its notices of appeal in both cases, effectively ending the agency’s efforts to revive the rule.

In a statement addressing the decision, current chair Andrew Ferguson explained that the FTC opted to prioritize “patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers, and taking bad actors to court,” and stressed that the agency will “continue to enforce the antitrust laws aggressively against noncompete agreements.”

To this end, on Sept. 4, 2025, the FTC announced that it had initiated an action against Gateway Services, Inc., the largest pet cremation services company in the nation, alleging in its complaint that Gateway, inter alia, weaponizes noncompete agreements against new and potential rival companies for purposes such as hindering hiring and preventing growth.

Impact of Noncompetes

That same day, the FTC launched a Request for Information regarding and soliciting public comment of the impact of noncompete agreements.

The inquiry, which is open for comment until Nov. 3, 2025, broadly seeks “information on the scope and use of these agreements, particularly their recent use,” as well as responses that provide, for example, the names of employers that may be using noncompete agreements, reasons for such use, enforcement methods or like-actions taken by employers, and/or limitations imposed on bound employees.

The FTC also included questions covering topics such as whether rival companies are negatively impacted by an employer’s noncompete, hiring and recruitment challenges, and effects of noncompetes utilized in the healthcare sector.

This reflects a broader trend of the FTC scrutinizing the use of noncompetes in the healthcare sector.

Indeed, this reflects a broader trend of the FTC scrutinizing the use of noncompetes in the healthcare sector.

On Sept. 10, 2025, it delivered a stern warning to healthcare companies regarding noncompete issues.

Specifically, Ferguson wrote letters to “several large healthcare employers and staffing firms urging them to conduct a comprehensive review of their employment agreements—including any noncompetes or other restrictive agreements—to ensure they are appropriately tailored and comply with the law.”

The letters address issues including, for example, how employment restrictions impact access to vital workers like nurses or physicians and otherwise limit the pool of available providers and care centers, especially in rural areas.

Takeaways

Despite the FTC’s decision not to defend the noncompete rule, the agency under this administration nevertheless is continuing in its own way to scrutinize noncompete agreements and covenants.

The FTC has demonstrated that it is prepared to take aggressive steps to enforce its policies.

The FTC’s focus on noncompetes in the healthcare industry is further confirmation that it will continue to prioritize evaluating competition in the healthcare industry.

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About the authors: Caitlyn Doerr is an associate in the Litigation Department in Wiggin and Dana’s New Haven office. Ben Diessel is a partner in the Litigation Department, chair of the firm’s Antitrust and Technology Disputes Practice Group, and a founding member of the Standard Essential Patent Licensing and Litigation Practice Group. Michael Kucharski is an associate in the Litigation Department and a member of the Antitrust and Technology Disputes Practice Group. Robert Langer is senior counsel in the Litigation Department and co-chair of the Antitrust and Technology Disputes Practice Group