By: Christopher Parrella, Esq., CPC, CHC, CPCO
Parrella Health Law, Boston, MA
A Health Care Provider Defense and Compliance Firm

What Happened?

The Federal Trade Commission (FTC) has issued a direct warning to healthcare employers and staffing firms: review your employment contracts and eliminate overly broad noncompete clauses.

In recent letters sent to major healthcare employers, the FTC emphasized that while narrowly tailored noncompetes may still serve a valid purpose, many employers are using provisions that unlawfully restrict nurses, physicians, and other medical professionals from seeking new opportunities.

Why the FTC Is Acting Now

• Withdrawal of the Biden-era rule: The FTC recently abandoned its defense of the prior administration’s sweeping attempt to ban nearly all noncompetes nationwide.
• Case-by-case enforcement: Instead of a blanket prohibition, the FTC is now targeting specific contracts that unreasonably restrict mobility.
• Healthcare under the spotlight: The Commission specifically highlighted the harmful effects noncompetes can have in healthcare markets.

What the FTC Says Is “Overly Broad”

The FTC’s letter makes clear that noncompetes are likely unlawful when they:

• Last too long in duration.
• Cover an unreasonably wide geographic area.
• Apply to lower-level workers whose roles do not justify post-employment restrictions.

Employers using such provisions risk FTC enforcement actions under Section 5 of the FTC Act.

Why Healthcare Employers Should Care

1. Regulatory Enforcement Is Coming
   
   • The FTC has already signaled it will pursue enforcement, with healthcare at the top of the list.
   • Recent settlements (e.g., Gateway Services Inc.) show the agency is serious.
2. Patient Access and Staffing Pressures
   
   • Noncompetes that prevent providers from moving between facilities directly reduce patient choice.
   • In underserved areas, this can mean patients lose access to critical care.
3. Compliance and Reputation Risks
   
   • Continuing to use overly broad noncompetes risks not only legal action but also reputational damage.
   • Providers that proactively review and adjust contracts will be seen as aligned with fair market practices.

What You Should Do Now

• Conduct a Comprehensive Review Audit all employment agreements, focusing on physicians, nurses, and mid-level providers.
• Narrow or Eliminate Overbroad Restrictions Consider alternatives like non-solicitation or confidentiality agreements that protect legitimate business interests without restricting mobility.
• Notify Employees If you discontinue overly broad clauses, notify affected staff promptly to mitigate exposure.
• Stay Informed The FTC has launched a request for public input on noncompete practices, signaling more oversight ahead.

Access the FTC Letter

You can read the FTC’s noncompete warning letter here:

FTC Warning Letter on Noncompetes (PDF)

Bottom Line

Healthcare employers are now on notice. Noncompetes that limit provider mobility or patient access will attract regulatory scrutiny. By taking action now, reviewing, revising, or eliminating overly broad restrictions, healthcare organizations can stay ahead of enforcement and demonstrate commitment to both compliance and patient care.

If you have any questions or comments about the subject of this blog, please contact Parrella Health Law at 857.328.0382 or Chris directly at cparrella@parrellahealthlaw.com.