Clinician's Brief previously reported on the Federal Trade Commission's (FTC) Final Rule in April 2024. This article has been updated with new developments as of August 21, 2024.
Texas judge blocks FTC noncompete ban
A U.S. District Court judge for the Northern District of Texas has struck down the FTC's noncompete ban.
In a 27-page memorandum opinion and order document, Judge Ada Brown criticized the ban as a blanket policy with no end date, ruling that the FTC lacks evidence to justify a broad ban on all noncompetes. Additionally, Judge Brown accused the FTC of not adequately addressing alternatives to a sweeping prohibition.
In summary, Judge Brown wrote that the ban “is based on inconsistent and flawed empirical evidence, fails to consider the positive benefits of noncompetes, and disregards the substantial body of evidence supporting these agreements.” Judge Brown concluded that the FTC lacks statutory authority to put a noncompete ban into effect.
As a result, the ban is blocked from taking effect on September 4, 2024, and noncompetes will continue to affect 30 million workers in the U.S.
"We are seriously considering a potential appeal, and today’s decision does not prevent the FTC from addressing noncompetes through case-by-case enforcement actions," wrote FTC spokesperson Victoria Graham in a statement to news organizations.
April 23, 2024
The Federal Trade Commission (FTC) issued a final ruling Tuesday, April 23, 2024, voting to ban noncompete clauses nationwide.
In early 2023, the FTC issued a proposed rule (ie, Final Rule) subject to a 90-day public comment period. More than 26,000 comments were received, with over 25,000 supporting the ban.
In the Final Rule, the FTC determined that employers entering into and enforcing certain noncompetes with employees is an unfair method of competition and, therefore, a violation of Section 5 of the FTC Act.
What is a noncompete in veterinary medicine?
A noncompete clause, also known as a noncompete, is a section of an agreement that restricts employees of a practice from leaving and taking a position at a practice considered to be a competitor. Restraints typically include a geographic area and a time period. Occasionally, the restraint might be client-specific or preclude a particular specialty in veterinary medicine.
From Our Archives: Navigating Noncompete Clauses in Veterinary Medicine
From Our Archives: Veterinary Noncompete Agreements: Know the Law
Noncompetes are common in veterinary medicine and may restrict practitioners’ and veterinary professionals’ career decisions.
“One of the issues…is that (noncompete) clauses can limit your mobility,” said Alyssa Watson, DVM, when discussing the possibility of the FTC ban in a 2023 Veterinary Breakroom podcast episode. “If you decide that your job is not a good fit and you want to leave, are you going to be able to find employment without uprooting your family?”
Why is the FTC banning noncompetes? What could it mean for the US workforce?
Noncompetes inhibit employees from changing jobs or starting new businesses, according to the FTC. With a ban on noncompetes, the FTC estimates new business formation could grow by 2.7% annually in the United States.1 This change could also boost earnings, lower healthcare costs, and drive innovation.
Nearly 1 in 5 Americans are currently subject to a noncompete, according to the FTC, and existing noncompetes for most employees would no longer be enforceable after the rule’s effective date.
The FTC estimates that the final rule banning noncompetes will lead to new business formation growing by 2.7% per year, resulting in more than 8,500 additional new businesses created each year. /3 pic.twitter.com/fFV50IqVZA
— FTC (@FTC) April 23, 2024
If a company currently has noncompete clauses or agreements, the new rule requires they notify employees that noncompetes “will not be, and cannot legally be enforced against the worker.”1
New noncompetes will still be allowed for sellers in connection with the bona fide sale of a business. Certain existing noncompetes with senior executives will be exempt, although new noncompetes will not be allowed.1
California, Minnesota, Oklahoma, and North Dakota have previously banned noncompete agreements. Several other states have also passed laws limiting the use of noncompetes, according to Reuters, with New York considering a ban as well.2
When would the noncompete ban go into effect?
The Final Rule was published in the Federal Register on May 7, 2024. According to the FTC, it will become effective 120 days after publication. Unless a legal challenge successfully delays it, it is slated to go into effect on Sept. 4, 2024. After that date, market participants can report information about a suspected violation to the Bureau of Competition at noncompete@ftc.gov.
US Chamber sues FTC to block noncompete ban
The US Chamber of Commerce is suing the FTC in an effort to block this “unnecessary and unlawful” rule, according to president and CEO Suzanne Clark.
“The Federal Trade Commission’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” said Clark in a statement. “This decision sets a dangerous precedent for government micromanagement of business and can harm employers, workers, and our economy.”
How would a noncompete ban affect veterinary medicine?
More information is needed to fully understand how this potential ban on noncompete clauses may impact veterinary professionals.
This page will be updated as new information becomes available. View the Final Rule here.