A federal court in Texas has thrown out the Federal Trade Commission’s (FTC) ban on noncompete language in employee contracts on the basis that the commission does not have the proper authority. An FTC committee moved in April to enact national policies against noncompete contracts that prohibit workers—including clinicians and executives—from going to market competitors or launching their own competitive businesses for a certain period of time after their contract with their employer ends. The court said the FTC rule is capricious and overly broad and ultimately set it aside just 2 weeks before the policy was set to go into effect. According to NPR, the FTC says it is “seriously considering a potential appeal.” California, Minnesota, North Dakota, and Oklahoma have general noncompete bans, and several other states have limited bans on this type of contracting for healthcare workers.
Pros and cons: Many American businesses, including hospitals and health systems, have expressed opposition to the noncompete ban, saying it would cause disruptions. However, advocates say allowing clinicians to move around freely or launch new practices could help solve the access issues in many markets. The FTC asserts that the freedom to change jobs is an essential facet of employment in America. While judicial skepticism of noncompete contracts seems to be building, provider organizations would be wise to create a labor strategy to respond to any future scenario in their state.