A federal judge has struck down a Federal Trade Commission (FTC) ban on noncompete agreements that was set to take effect September 4. A federal judge in Texas ruled that The FTC had overstepped the powers given to it by Congress, and that the ban was "arbitrary and capricious."
An FTC spokesperson responded that "we are disappointed by Judge Brown's decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages."1
Had the rule gone into effect, it would have had major impacts for dentistry, banning future associate agreements and retroactively voiding those already in place.2 The FTC had claimed that the ban would have reduced health-care patient spending by up to "$148 billion annually, and doubled the number of companies founded by a former worker in the same industry."3
Although the FTC's rule has been blocked for now-they say they're weighing an appeal-noncompete bans are not a thing of the past. The Workforce Mobility Act of 2023 was introduced to the Senate last year, but did not go forward out of committee.
Many states are looking to or have already passed bans on provisions preventing health-care workers from changing jobs, says Bloomberg Law: "Interest in limiting noncompetes at the state level has grown in recent years, in part to prevent health workforce shortages in regions known to have restrictive noncompete clauses in employment contracts." California, Minnesota, North Dakota, and Oklahoma already have these types of bans, and more states are considering them.4
According to a December 2023 article in Dental Economics by J. Robert Brooks, CEPA, CBI, the major impacts would have been the following:
- "Associates will have greater freedom to accept new employment opportunities and new practice purchase opportunities."
- Individual private practice owners wouldn't have been impacted initially, but the FTC's plan to "reduce patient health-care spending and increase competition [would have reduced] practice value."
- For practice sellers, the ban's impact was tougher to predict. It could have created more competition and thus driven up prices, but would have impacted "the legitimate business interests of practice owners in some scenarios."2
According to dental HR experts Rebecca Boartfield and Tim Twigg of Bent Erickson & Associates, "Where there isn't an outright ban, states have applied a more nuanced approach to their restrictions in an effort to ensure fairness."5
References
1. Giorno T. Federal judge blocks FTC noncompete ban. The Hill. August 20, 2024. https://thehill.com/business/4837806-ftc-noncompete-ban-blocked/
2. Brooks JR. Winners and losers of the FTC's noncompete ban. Dental Economics. December 4, 2023. https://www.dentaleconomics.com/practice/article/14301632/winners-and-losers-of-the-federal-trade-commissions-noncompete-ban-in-dentistry
3. FACT SHEET: FTC proposes rule to ban noncompete clauses, which hurt workers and harm competition. Federal Trade Commission. https://www.ftc.gov/system/files/ftc_gov/pdf/noncompete_nprm_fact_sheet.pdf
4. Castronuovo C. States take lead on health noncompete limits with FTC ban tossed. Bloomberg Law. August 22, 2024. https://news.bloomberglaw.com/health-law-and-business/states-take-lead-on-health-noncompete-limits-with-ftc-ban-tossed
5. Boartfield R, Twigg T. Noncompete agreements: A relic of the past? Dental Economics. November 1, 2023. https://www.dentaleconomics.com/practice/article/14299846/noncompete-agreements-a-relic-of-the-past
