Hospital Groups Support Strike Down of FTC Noncompete Ban

• Days before the Federal Trade Commission’s noncompete ban would have gone into effect, a federal judge in Texas struck down the ruling.
• The ban originally was set to take effect on Sept. 4, 2024, but the judge’s ruling cited overreach and a lack of authority in blocking its implementation.
• The American Hospital Association, which has been vocal in its opposition to the FTC noncompete ban, lauded the judge’s decision.

Days before the Federal Trade Commission’s (FTC) ban on noncompete clauses would have gone into effect, a federal judge stopped the move — something hospital associations have been waiting for. 

The ban was announced in April and set to take effect on Sept. 4. However, a federal judge in Texas blocked the ruling, citing overreach and a lack of authority. 

How Did We Get Here?

The FTC first proposed its noncompete ban in January 2023. In April 2024, the organization issued its final ruling on the matter, calling noncompete clauses an “unfair method of competition.” More than 8,500 new businesses were expected to be created as a result of the ruling, according to FTC estimates, along with a boost in workers’ wages.

A few months later, a preliminary injunction was granted through the U.S. District Court for the Northern District of Texas. That injunction has been made permanent and applies nationwide.

Ada Brown, the federal judge who issued the injunction, ruled that the FTC “lacked the authority to issue substantive rules related to unfair methods of competition, including the noncompete rule,” according to “The New York Times.”

Brown also ruled that the noncompete rule was unconstitutional and “arbitrary and capricious.”

FTC spokeswoman Victoria Graham told the NYT the commission is considering an appeal and clarified that the injunction doesn’t prevent them from “addressing noncompetes through case-by-case enforcement actions.” 

Medical Community Response to Judge’s Noncompete Ban Ruling

The American Hospital Association (AHA) called the initial FTC ban a “breathtaking assertion of regulatory power.” 

“We are pleased that Judge Brown vindicated what the AHA predicted when this unlawful regulation was first released — the ‘only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals’ ability to care for their patients and communities,’” Chad Golder, AHA’s general counsel and secretary, said in a recently released statement. 

An American Health Care Association/National Center for Assisted Living representative told “McKnight’s Senior Living” that it also supported the Brown’s ruling. 

“Rather than excessive overreach, we encourage the administration to instead work on more productive, rational regulations that prioritize and protect access to care for our nation’s seniors,” said Clif Porter, AHCA/NCAL senior vice president of government relations and incoming president and CEO. 

Prior to the August ruling, law firms had been advising that health systems and healthcare clients “review and ‘future proof’ their [noncompete] agreements,” according to Axios. 

National Nurses United and the American Nurses Association, which had previously voiced support for the FTC’s noncompete ban, have yet to issue statements on the injunction. 

State-Level Noncompete Bans Still in Play

Four states — California, North Dakota, Minnesota, and Oklahoma — have banned noncompete clauses. Meanwhile, more than 30 states and Washington, D.C., have restrictions related to them, according to the Economic Innovation Group.

Legislators in the following states have recently introduced measures that, if approved, would implement some variation of a noncompete ban in the healthcare industry: 

• Arizona 
• Georgia 
• Kentucky 
• Missouri 
• New York 
• Rhode Island 
• Tennessee 

Several other states have recently passed noncompete bans in the healthcare sphere, but they have yet to take effect. 

The Bottom Line

The Federal Trade Commission issued a ban on noncompete clauses in Spring 2024. However, a federal judge in Texas blocked the nationwide ban days before it was set to take effect on Sept. 4, 2024. Hospital organizations have applauded the judge’s ruling. Meanwhile, state-level legislation is still in play and the FTC has not lost its authority to address noncompete issues on a case-by-case basis. 

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