Federal Trade Commission (FTC) Chairman Andrew Ferguson sent letters to "several large healthcare employers and staffing firms" Wednesday suggesting they review their employment contracts for any noncompete agreements that are overly broad or anticompetitive.
The letters were sent to an undisclosed number of unnamed companies, and were intended as a broad warning rather than a suggestion that the recipients had engaged in illegal conduct.
Rather, the commissioner pointed to "available information" that such improper agreements are prevalent in the healthcare industry, where they "may have particularly harmful effects in healthcare markets where they can restrict patients' choices of who provides their medical care." As such, the regulator said in an accompanying statement that healthcare employers who didn't receive the letter should review their current agreements for compliance.
"If your company is currently using noncompetes that are unfair or anticompetitive under the FTC Act, I strongly encourage you to discontinue them immediately and to notify relevant employees of the discontinuance," the chairman wrote.
The letters follow messaging from last week that the FTC intends to be proactive on noncompete enforcement, despite swapping out a prior plan for sweeping noncompete bans in favor of narrower, "case-by-case" scrutiny (see below).
Sept. 5
FTC asks public to weigh in on 'case-by-case' regulation of employers' noncompetes
As a blanket ban languishes in the courts, the Federal Trade Commission (FTC) has put out a new call for the public to guide its “case-by-case” enforcement of harmful employer noncompete agreements.
The FTC said the information it gathers may inform "possible future enforcement actions." The 60-day request for information (RFI) circulated Thursday paints a stark line between the rule issued last year under the Biden administration, which aimed to prevent any new noncompetes and phase out most already on the books. That rule was blocked in the courts, and after initially appealing the commission voted Friday to pull out.
The FTC’s conservative commissioners opposed the rule at the time, writing in dissenting opinions that it was overly broad, exceeded the commission’s authority and was likely to upend the existing labor market. Hospital groups agreed and wrote in their own letters to the regulator that the rule’s carve-outs for nonprofits would create an unequal playing field for tax-paying healthcare employers.
Now with a three-to-one majority, conservative commissioners have outlined a narrower plan to address “harmful labor market conduct through case-by-case enforcement and public advocacy,” the FTC wrote in the RFI.
The regulator wrote that while noncompetes “can serve valid purposes in some circumstances,” the agreements are often imposed “without due consideration” of alternative terms that would be more appropriate and avoid anticompetitive harms. In some cases reviewed by the agency, the restraints can “unjustifiably” limit worker movement, prevent the formation of new businesses, raise prices and reduce worker earnings, the FTC wrote.
“These concerns may be especially significant in healthcare markets, where noncompete agreements may limit employment options for nurses, physicians and other medical professionals and thereby restrict patients’ choices of who provides their medical care,” the FTC wrote in the RFI. “These harms may be particularly acute in rural areas where medical services are already stretched thin.”
The FTC said it is interested in better understanding the scope of current and recent noncompete agreements to guide its enforcement efforts and called for employees, employers “and market participants in the healthcare sector in particular” to participate.
Some questions outlined in the RFI are specific to healthcare, such as one asking whether noncompete agreements had affected the availability, quality or costs of healthcare services. Another asks whether noncompetes had made it more difficult for healthcare providers to hire practitioners and other workers, with a focus on effects limited to geographic areas or service lines.
“We are asking the public to help shine a light on unfair and anticompetitive agreements,” said Kelse Moen, deputy director of the Bureau of Competition and co-chair of the agency’s Joint Labor Task Force, in a release. “Unreasonable noncompete agreements have proliferated for too long in the dark. With the assistance of the employees and workers most burdened by them, the Trump-Vance FTC intends to uproot the worst offenders and restore fairness to the American labor market. We look forward to closely reviewing every response.”
The FTC’s request came alongside the announcement of a noncompete enforcement action taken against a pet cremation company. Commissioner Rebecca Kelly Slaughter, the regulator’s lone Democrat whose position is part of an ongoing legal battle with the White House, said she agreed that the company’s conduct should be stopped but officially dissented in apparent protest of the targeted enforcement strategy being pursued by the agency.
“Without touching the structural issues in the market, a non-compete remedy, however meaningful, will not successfully protect consumers or workers in the pet aftercare market,” Slaughter wrote in her dissent.