Just when you thought it was safe to go back in the water… the FTC surfaces again.
Today (September 10), the FTC announced that it “sent 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 announcement continues, in relevant part, as follows:
Many healthcare employers and staffing companies may include unreasonable noncompete agreements in employment contracts for vital roles like nurses, physicians, and other medical professionals. These restrictions can unreasonably limit healthcare professionals’ employment options and thereby limit patients’ choices over who provides their medical care—including, critically, in rural areas where medical services are already stretched thin, the letters state.
“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.”
. . . Chairman Ferguson made clear that the FTC would stay vigilant “enforcing the antitrust laws aggressively against noncompete agreements” including by “patrolling our markets for specific anticompetitive conduct that hurts American consumers and workers, and taking bad actors to court.”
Though we do not know which healthcare or staffing companies received these letters, the letters reflect precisely what the FTC said it would be doing. So, expect more.
Takeaways
Given the FTC’s clear intent to make headlines with some high-profile examples, I cannot over emphasize that now is the time to review your noncompetes, other restrictive covenants, and policies and procedures, and consider what you need and what you can eliminate. And, if you eliminate any, make sure you have a plan for how to protect your company’s legitimate business interests without them.
As identified yesterday, here are some alternative tools to consider:
- Nondisclosure / Confidentiality Agreements: Every employee with access to confidential information should have a nondisclosure / confidentiality agreement. These agreements are routinely enforced, but need to avoid overreaching to protect information that is not confidential. Courts have cracked down on overly broad confidentiality agreements.
- Pay-to-Not-Play Agreements (a/k/a Stand-Down Incentive Agreements — I’m still workshopping the name): These agreements provide incentives to employees who would otherwise be appropriate candidates for a noncompete. The employer and employee agree that the employee is free to compete post-employment, but if the employee chooses not to, the company will pay them an agreed-upon amount during the period the employee refrains from competing. It is the inverse of a forfeiture-for-competition agreement, insofar as the employee is not forfeiting payments to which they are entitled. Rather, they have an opportunity to earn extra money — even while working for another company consistent with the terms of the agreement. I can see arguments for why these agreements would not be enforceable, but in reality, that should never be an issue, as there is little incentive to challenge them.
- Garden leave clauses (a/k/a Notice Requirements — i.e., a “true” garden leave clauses): Another type of agreement that is increasingly in vogue following the issuance of the FTC’s failed Noncompete Rule is an agreement requiring advance notice of resignation. This is not a paid-for-noncompete, where the employee leaves and is paid during the restricted period of a noncompete. This is more like the traditional garden leave from England, where the employee remains employed, though typically put on administrative leave, and retains the benefits (remaining on the payroll) and burdens (fiduciary duties) of employment. The FTC specifically disavowed application of the Noncompete Rule to true garden leave clauses.
- Training Repayment Agreements: For employees where there is a true, documentable investment in their training, use training repayment agreements (pejoratively called TRAPs) can be a way to offset the cost of their departure. Of course, the repayment obligations should typically be reduced as the employer recovers the investment and, more importantly, the agreements need to comply with the developing law. Colorado’s 2024 law, for example, imposed limitations on these agreements, and you can expect the FTC to scrutinize them as well. But a fair training repayment agreement that reasonably requires reimbursement is an option to at least evaluate in the right circumstances.
- No-announcement Covenants and Policies: At the time an employee departs, some states allow them to announce their departure, while other states have no such rule. Consider whether a no-announcement agreement or policy makes sense.
- Trade Secret Protection Programs: No matter what agreements and policies your company relies on, a proper trade secret protection program — including, for example, pre-employment trade secret trainings — is an important way to limit the infiltration and exfiltration of trade secrets and other confidential information.
Whatever approach you take should involve a holistic review of what makes sense in your particular industry and for your company. And, of course, it needs to comply with applicable state and federal law — both of which are constantly evolving.
With the FTC now pursuing the overuse of noncompetes and other restrictive covenants through case‑by‑case adjudication, there will be many judgment calls to make. The tools identified above should help, but some — like the Pay‑to‑Not‑Play agreements and no‑announcement covenants — are novel and could face challenges. So, employers need to thoughtfully evaluate and implement a plan, considering which tools to use and how to stack their protections.
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Firm resources:
We know how hard it is to keep up with the ever-changing laws and requirements around the country for how you can protect your trade secrets, customer goodwill, and the integrity of your workforce. To help, we have created the resources below (available for free). Each chart is regularly updated to reflect the latest developments.
 | 50-State Noncompete Law Chart, the first of its kind and regularly updated (downloadable PDF) (to be updated for the new exemptions in Illinois and Pennsylvania)50-State and Federal Trade Secret Law Chart, providing a comparison of the trade secrets laws nationally to the Uniform Trade Secrets Act (downloadable PDF) |
 | Chart of Noncompete “Low-Wage” Thresholds and Criteria (downloadable) |
 | Notice requirements summary chart, providing details for each of the 8 states (plus D.C.) that has notice requirements related to noncompetes (downloadable PDF) |
 | “Changing Trade Secrets | Noncompete Laws” (dedicated blog page) now provides a current detailed summary of the changing landscape of trade secret laws and noncompete laws around the country, state by state and at the federal level |
 | Trade secret and other legitimate business interest protection plan strategy and checklist |
We hope you find all of these resources useful. More will be coming.
And please note, we are grateful for all of the input we’ve received over the years. We welcome any suggestions for improvements that you may be willing to share.
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*A huge thank you to Erika Hahn for bringing the FTC’s announcement to my attention today.