Our employer clients often inquire about including non-compete clauses in their employment agreements. Non-compete agreements are contractual clauses that restrict an employee from taking certain jobs (typically with competitors) or starting competing businesses after the employee’s employment ends. They are important tools to protect trade secrets, investment in training, and customer relationships. Generally, non-compete clauses are enforceable if they are sufficiently limited to serve the business needs without unduly burdening the employee and if they are supported by adequate consideration at the time of creation.
But critics argue these clauses hurt competition, limit worker mobility, suppress wages, and stifle entrepreneurship, and they have become a target of regulatory scrutiny in recent years. During the prior presidential administration, the Federal Trade Commission (“FTC”) advanced an aggressive position against non-compete agreements. In January 2023, the FTC proposed a rule broadly banning non-compete clauses, because they constitute an “unfair method of competition” under Section 5 of the FTC Act. The FTC adopted its final Non-Compete Clause Rule a few months later, which would have prohibited all new non-compete agreements and invalidated most existing ones, with narrow exceptions for senior executives. The rule was scheduled to take effect last September.
Judicial Pushback and FTC Retreat
The FTC’s non-compete ban met swift challenge in federal courts, including the Northern District of Texas (Ryan, LLC v. FTC) and Middle District of Florida (Properties of the Villages v. FTC). Both courts ruled that the FTC lacked authority to enforce a nationwide ban on non-compete agreements, finding the rule “arbitrary and capricious.” The FTC appealed these decisions, but on September 5, 2025, it announced that it would dismiss its appeals, effectively ending support for the nationwide ban. The Commission voted 3-1 (with Commissioner Slaughter dissenting) to concede, marking a significant shift in strategy.
While some viewed this as a white flag, employers should not assume the FTC is backing down entirely. In a September 10, 2025, letter to major healthcare organizations, FTC Chairman Andrew Ferguson emphasized that the agency remains committed to “rooting out unfair and anticompetitive conduct in labor markets and the healthcare sector,” with particular concern for the employment terms of nurses, physicians, and other medical professionals. This statement suggests the FTC will pivot from sweeping rulemaking to targeted enforcement under its investigatory powers in Section 5 of the FTC Act.
Implications for Healthcare Employers and Pennsylvania Businesses
Healthcare employers remain a focal point of the FTC’s enforcement priorities. Non-compete agreements that restrict workers in “vital roles” are at heightened risk of challenge. Employers should anticipate case-by-case enforcement actions where agreements are seen as overbroad or applied to lower and mid-level employees.
At the state level, Pennsylvania employers must also account for House Bill 1633, signed into law in July 2024. That statute limits the enforceability of non-compete agreements for healthcare workers within the Commonwealth and provides another layer of compliance considerations for healthcare organizations. Employers operating in Pennsylvania should carefully review their contracts to ensure they align with both state restrictions and the FTC’s evolving enforcement stance.
Key Takeaways for Employers
- The FTC’s nationwide ban on non-compete agreements has been withdrawn, but the agency continues to focus on specific agreements it considers to be overly broad.
- Healthcare employers should expect increased scrutiny of non-compete agreements for nurses, physicians, and other medical professionals.
- Pennsylvania law imposes its own limits on healthcare non-compete agreements through House Bill 1633.
- State laws in other jurisdictions remain unaffected by the FTC’s retreat.
- Future changes in federal leadership could revive efforts at a broader ban.
Ultimately, the FTC’s recent actions show a shift in strategy, not a change in policy goals. Employers should remain proactive in reviewing non-compete agreements, tailoring them narrowly to protect legitimate business interests while complying with both federal enforcement trends and applicable state laws.
