The battle against the FTC noncompete ban heats up

The Federal Trade Commission voted to ban noncompete clauses for most U.S. workers April 23, and organizations have begun to file lawsuits. 

The rule makes it illegal to include noncompetes in employment contracts unless the employer is a nonprofit, and it requires organizations with noncompetes to inform workers that they are void.

The U.S. Chamber of Commerce begun taking action to sue the FTC on April 24, arguing the FTC is overstepping its authority. Three other business groups — the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce — joined the suit. 

A tax services firm in Dallas and a Pennsylvania company, ATS Tree Services, which employs only 12 people, are also suing the FTC, raising concerns similar to the chamber of commerce. 

The Federation of American Hospitals has said the noncompete ban will further burden already struggling hospitals. 

"The ban makes it more difficult to recruit and retain caregivers to care for patients, while at the same time creating an anticompetitive, unlevel playing field between taxpaying and tax-exempt hospitals — a result the FTC rule precisely intended to prevent," Chip Kahn, president and CEO of the federation, said in a statement shared with Becker's. "In a time of constant healthcare workforce shortages, the FTC's vote today threatens access to high-quality care for millions of patients."

Many physicians are excited about the prospect of a noncompete ban. The American Medical Association estimates that between 35% and 45% of physicians in the U.S. are bound by noncompete clauses. 

"Banning noncompete clauses for physicians can significantly enhance community benefit," Ernest Braxton, MD, chief of neurosurgery at Vail-Summit Orthopaedics and Neurosurgery in Vail, Colo.,, told Becker's. "Such clauses restrict doctors from practicing within a certain radius of their former workplace for a specified period, hindering patients' access to healthcare services. By eliminating these constraints, physicians can freely relocate to areas with underserved populations, improving medical access and quality of care."

Alden Abbott, a former FTC general counsel, said in an April 29 Forbes report that the rule is likely to fail. 

"Some time will pass before we see legal resolution of the noncompete issue," he said in the article. "It’s also possible that, if administrations change, future FTC leadership withdraws the rule."

The FTC has made clear that the healthcare provider space will be a priority for enforcement. The commission estimates $74 billion to $194 billion in reduced spending on physician services over the next 10 years if the rule is enacted. 

The battle against noncompetes has already been taking place at the state level. Most recently, Maryland Gov. Wes Moore signed a law prohibiting noncompetes for healthcare professionals. Additionally, the Pennsylvania House passed legislation that would ban noncompete clauses for  physicians, certified registered nurse practitioners and physician assistants.

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