Judge blocks FTC noncompete ban

U.S. District Judge Ada Brown in Dallas, Texas, struck down the Federal Trade Commission's noncompete ban, which was scheduled to go into effect on Sept. 4, 2024. In the final decision, Brown wrote that "the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious."

The FTC announced its final rule on the noncompete ban in April 2024, barring most types of post-employment agreements that prevent former employees from working for a competitor for a specific period of time. The sweeping rule would affect employers and employees across a variety of industries, including healthcare.

In its final rule, the FTC stated that noncompete agreements are "an unfair method of competition" and that they "tend to negatively affect competitive conditions in labor markets by inhibiting efficient matching between workers and employers."

Following the release of the final rule, hundreds of national associations called on the FTC to delay the effective date of the noncompete ban in order to first resolve court cases challenging the ban. The American Hospital Association (AHA) was among the coalition that opposed the rule, with General Counsel Chad Goulder calling the rule "bad law, bad policy, and a clear sign of an agency run amok."

Other healthcare groups took the opposite stance at the time. For example, the American Academy of Family Physicians (AAFP) said it was encouraged to see that the FTC intended for the ban to extend to nonprofit entities, such as nonprofit health systems.

Now that the ban has been struck down, employers can continue using noncompete agreements. If the FTC chooses to appeal the decision, it will likely take a significant amount of time to reach a resolution.

The AHA expressed satisfaction regarding Judge Brown's decision. In a statement following the decision, Golder described the rule as "a breathtaking assertion of regulatory power by three unelected Commissioners, made worse by the fact that the Commissioners did not attempt to understand the disruptive impact it would have on hospitals, health systems, and the patients they serve."

Meanwhile, other healthcare associations saw Brown's decision as a loss.

"The AAFP is disappointed a federal court injunction will block the FTC's noncompete rule from going into effect," said Steven P. Furr, MD, FAAFP, president of AAFP. "Noncompetes harm family physicians and their patients by jeopardizing long-term patient-physician relationships and creating an uneven playing field for physicians. The AAFP will continue to support the FTC's mission to eliminate noncompetes in healthcare that prioritize the interests of organizations over those of patients and their physicians."

Jill McKeon has covered healthcare cybersecurity and privacy news since 2021.