The Federal Trade Commission has finalized a consent order requiring Gateway Services, Inc., a pet cremation company, to stop enforcing noncompete agreements against its employees, freeing nearly 1,800 workers from restrictive employment clauses that prevented them from working anywhere in the pet cremation industry for one year after leaving the company.
The Commission voted 2-0 to approve the final order following a public comment period, marking another enforcement action in the FTC's broader campaign against noncompete agreements that the agency argues harm workers and competition.
Under Gateway's previous noncompete agreements, employees were prohibited from working in the pet cremation service industry anywhere in the United States for one year after leaving the company. The FTC alleged these agreements were anticompetitive and suppressed competition in the marketplace.
The final consent order requires Gateway Services and its subsidiary to immediately stop enforcing existing noncompete agreements specified in the order. Additionally, the company is permanently prohibited from entering into similar restrictive employment agreements moving forward.
The order resolves an FTC complaint that challenged Gateway's noncompete practices as violations of federal antitrust law. The agency argued that such agreements limit job mobility and reduce workers' ability to negotiate better wages and benefits by restricting their employment options.
For the nearly 1,800 affected employees, the order means immediate freedom from contractual restrictions that previously limited their career choices within the pet cremation industry. Workers will now be able to seek employment with competitors, start their own businesses, or leverage job opportunities to negotiate improved compensation and working conditions.
The Gateway Services case reflects the FTC's intensified focus on employment practices that may harm competition and worker welfare. Under the current administration, the Commission has taken an aggressive stance against noncompete agreements, viewing them as tools that artificially suppress wages and limit economic mobility.
Noncompete agreements have traditionally been used by employers to prevent workers from joining competitors or starting competing businesses, ostensibly to protect trade secrets and customer relationships. However, critics argue that such agreements are often overly broad and disproportionately harm workers, particularly in industries where specialized knowledge transfer is less of a concern.
The pet cremation industry, where Gateway operates, involves services that many argue do not require the level of proprietary knowledge that would justify nationwide employment restrictions. The FTC's action suggests the agency will scrutinize noncompete agreements not just in high-tech or research-intensive fields, but across various service industries where such restrictions may be difficult to justify.
For Gateway Services, the consent order requires compliance with specific terms designed to ensure workers can freely pursue employment opportunities. The company must notify affected employees about the order's terms and their newly restored employment freedom.
The unanimous Commission vote demonstrates bipartisan concern about potentially anticompetitive employment practices. Even commissioners who may disagree on other enforcement priorities appear aligned on addressing noncompete agreements that lack clear business justifications.
The order's impact extends beyond Gateway's immediate workforce. Other companies in the pet services industry and related fields may reassess their own noncompete policies in light of the FTC's enforcement approach. The decision signals that the Commission will challenge such agreements when they appear to restrict competition without corresponding benefits to innovation or legitimate business interests.
For businesses that rely on noncompete agreements, the Gateway case highlights the importance of narrowly tailoring such restrictions to protect only legitimate business interests. Overly broad geographic or temporal restrictions, particularly in service industries, may face increased FTC scrutiny.
The consent order also reflects broader economic policy debates about worker mobility and wage competition. Proponents of restricting noncompete agreements argue that such limitations artificially depress wages by reducing workers' bargaining power and limiting job market competition.
Moving forward, the FTC's enforcement approach in the Gateway case may serve as a template for challenging noncompete agreements in other industries where such restrictions appear disproportionate to legitimate business needs. Companies should expect continued scrutiny of employment practices that may limit competition or worker mobility.
The order becomes effective immediately, meaning Gateway must cease enforcement of existing noncompete agreements and cannot enter new ones. For the 1,800 affected workers, this represents immediate relief from contractual restrictions that previously limited their employment choices within their chosen industry.