The Current State of the FTC Rule Banning Non-Competes: What Health Care Employers Need to Know

• August 06, 2024

• Jenna Brofsky , Husch Blackwell LLP
• Allison Minicky , Husch Blackwell LLP

UPDATE: FTC Non-Compete Ban Set Aside Nationwide. On August 20, 2024, Judge Ada Brown in the Northern District of Texas issued an Order setting aside the FTC's Rule in the matter Ryan, LLC v. FTC, Case No. 3:24-CV-00986-E . Judge Brown found that the Rule was an unlawful agency action for which the FTC did not have authority and that the Rule was arbitrary and capricious. The Opinion and Order enjoined the FTC’s Rule nationwide, meaning the ban will not go into effect on September 4. Employers may continue to enter into and enforce non-compete agreements with workers subject to state law.  Employers need not issue notice to workers as contemplated by the Rule. The FTC will likely appeal the ruling to the 5th Circuit and eventually the Supreme Court.

On April 23, 2024, the U.S. Federal Trade Commission (FTC) voted 3-2 to finalize a new rule that prohibits organizations from entering into non-compete agreements with workers (the Rule). Non-compete agreements, or “non-competes,” are a form of restrictive covenant that place restrictions on an individual to prevent them from competing against their employer/former employer. Under the Rule, which is scheduled to go into effect on September 4, 2024, employers are barred from entering into non-competes with workers on or after the effective date. The Rule also prohibits employers from enforcing non-competes that predate the Rule, other than agreements with senior executives. While the Rule is facing challenges in the courts, it has yet to be fully enjoined.

ARTICLE TAGS

• Labor and Employment Practice Group
• Antitrust