Groups prepare to sue FTC over noncompete ban

On April 23, the Federal Trade Commission officially banned noncompete clauses for the majority of U.S. workers, making it it illegal to include noncompetes in employment contracts and requiring companies with noncompetes to inform workers that they are void.

Just one day later, the U.S. Chamber of Commerce has already taken action to sue the FTC, according to an April 24 report from The New York Times.

In its lawsuit, the chamber argues that the FTC is overstepping its authority by completely banning noncompetes. 

The Chamber of Commerce was joined by three other business groups: the Business Roundtable, the Texas Association of Business and the Longview Chamber of Commerce. 

The lawsuit calls the ban "a vast overhaul of the national economy, and applies to a host of contracts that could not harm competition in any way." 

A tax services firm in Dallas is also suing the FTC, raising similar concerns to the chamber of commerce. 

These two lawsuits are expected to be just the beginning of litigation taken against the FTC, according to the report. 

The new noncompete ban is set to become law 120 days after it is published in the Federal Register later this week, though now it may be tied up in a long legal battle.

Noncompetes have long been a topic of conversation among physicians and health systems. The American Medical Association estimates that between 37% and 45% of physicians in the U.S. are bound by noncompete clauses, and noncompete clauses lead to wage reduction totaling $300 billion each year.

While some physicians feel positively about the new rule, others are not so sure. 

"Especially for physicians, noncompetes are a massive barrier to being able to be part of a care system and move within the state and not have to switch complete regions. Sometimes physicians are locked into certain jobs and basically can't ever leave with their kids in school or communities they develop despite an organization not performing well. I think being able to get rid of the noncompete clause is just a total game changer," Michael Gallizzi, MD, an orthopedic surgeon at the Steadman Clinic in Vail, Colo., told Becker's.

"As a private practice surgeon, I see the benefits to a noncompete. Hospitals use income guarantees to help medical groups fund and recruit new physicians into the area, which is extremely helpful. Without a noncompete, a hospital system may not have much incentive to assist groups and new recruits starting their careers. Similarly, spine and orthopedic groups that float this one- to two-year salary could be on the hook if their new recruit simply leaves for [another practice] after a year before they became more productive locally," Chester Donnally, MD, a surgeon at Texas Spine Consultants in Dallas, said.  

The Federation of American Hospitals has also taken a stand against the noncompete ban, saying that it 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."

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