On September 10, the Federal Trade Commission sent warning letters to hospitals and staffing firms regarding their use of non-compete agreements in employment contracts.1 These letters represent more than routine regulatory correspondence. They signal the FTC’s serious intention to scrutinize and potentially challenge restrictive employment practices that they believe harm competition and limit worker mobility.
Staffing leaders must treat these warnings as a clear indication that business practices around non-compete clauses are under federal regulatory review. Understanding what prompted these letters and how your firm should respond can prevent future compliance risks and concerns.
What You Need to Know About FTC’s Warnings
Non-compete agreements are clauses in employment contracts that prevent an employee from working for a competitor for a certain time after leaving that company.
The warning letters sent by the FTC specifically urge staffing firms to review their non-compete and restrictive covenants in employment contracts. The agency’s concern focuses particularly on how these agreements affect healthcare professionals, though the principles apply across industries.2
The letters emphasize that overly broad non-compete clauses may limit healthcare professionals’ mobility between employers, restrict patient choice in selecting care providers, and harm competition in healthcare markets. These restrictions can prevent qualified professionals from working in their field, force them to relocate to find employment, or push them out of the industry entirely.
The agency particularly targets agreements that prevent workers from accepting better employment opportunities. They’re also paying attention to those that restrict an individual’s ability to use general skills and knowledge gained during employment.
Why Does This Matter for Your Firm?
The FTC warnings on non-compete agreements carry implications that extend well beyond the specific firms that received letters. Understanding how these warnings affect your operations, legal exposure, and competitive positioning helps you respond proactively rather than reactively.
1. Direct Enforcement Risk Exposure
Even if your firm did not receive a warning letter, the FTC’s actions demonstrate that staffing industry employment practices are under active review. The agency could expand its enforcement efforts to additional firms, particularly those using similar restrictive covenant language.
Any staffing firm currently using non-compete agreements faces potential scrutiny that could result in enforcement actions, legal costs, and requirements to modify or eliminate these provisions from existing contracts.
2. Client Relationship Implications
Client organizations are becoming more sophisticated about the legal and ethical implications of working with staffing partners who use restrictive employment practices. Some clients now specifically ask about staffing firms’ use of non-competes during vendor selection processes.
Clients concerned about their own legal exposure or ethical standards may prefer partners who have moved away from restrictive contracts that could create complications or limit their access to talent pools.
3. Reputational Risk in Industry Communities
The staffing industry operates within relatively tight professional communities where reputation matters significantly. Firms identified in FTC actions or known for aggressive non-compete enforcement can develop negative reputations that affect relationships with candidates, clients, and industry partners.
Your Response Playbook
Understanding the implications of the FTC warnings on non-compete agreements is only the first step. Staffing firm leaders need a clear action plan for reviewing and potentially modifying their employment practices to align with evolving regulatory expectations.
1. Conduct Immediate Internal Policy Review
Begin by pulling all current employment agreement templates and reviewing every non-compete provision your firm currently uses. Identify the specific restrictions each agreement imposes, including duration, geographic scope, and the types of employment or business activities prohibited. Compare your current practices against FTC guidance and recent enforcement actions to identify provisions that might be considered overbroad or unjustified.
2. Develop Modified Agreement Templates
Work with legal counsel to create updated employment agreement templates that protect your business without broad non-compete restrictions. Focus on more targeted alternatives:
- Non-solicitation agreements prevent former employees from actively recruiting your clients or current staff members
- Confidentiality agreements protect your proprietary information, trade secrets, and business processes without limiting where someone can work next
These narrower protections often give you meaningful safeguards while avoiding the sweeping competition bans that regulators are targeting.
3. Communicate Transparently with Current Staff
Address the non-compete issue directly with your current employees rather than hoping they do not notice regulatory developments. Explain that your firm is reviewing its employment practices in light of regulatory guidance and consider offering to modify or release employees from existing non-compete obligations. Proactive communication demonstrates good faith and can prevent employee relations problems that arise when staff feel trapped by outdated agreements your firm no longer intends to enforce.
4. Update Recruitment and Retention Strategies
Shift your talent retention strategy away from contractual restrictions. Instead, move toward positive retention factors such as competitive compensation, professional development opportunities, positive workplace culture, and clear advancement paths.
When recruiting new talent, emphasize that your firm does not impose restrictive non-competes as a competitive advantage over firms that continue using these agreements. Make your employment practices a positive differentiator that attracts rather than repels quality candidates.
What’s your firm’s approach to non-compete agreements?
The regulatory landscape is shifting, and staffing firms are navigating these changes in real time. Have you already moved away from non-competes, or are you still evaluating alternatives? What protective measures have proven most effective for your business?
At All Things Staffing, we believe the industry’s collective experience helps everyone adapt more strategically. Share your insights, challenges, and questions with the community—your perspective could help fellow staffing professionals make better-informed decisions as regulations continue to evolve.
References
- “FTC Chairman Ferguson Issues Noncompete Warning Letters to Healthcare Employers and Staffing Companies.” FTC, 10 Sept. 2025, www.ftc.gov/news-events/news/press-releases/2025/09/ftc-chairman-ferguson-issues-noncompete-warning-letters-healthcare-employers-staffing-companies.
- “Federal Trade Commission Issues Request for Information on Employee Noncompete Agreements.” FTC, 4 Sept. 2025, www.ftc.gov/news-events/news/press-releases/2025/09/federal-trade-commission-issues-request-information-employee-noncompete-agreements.
