Five states have passed healthcare noncompete bans, and seven states have introduced similar bills.
The Federal Trade Commission attempted to institute a nationwide noncompete ban that would have invalided tens of millions of agreements and banned hospitals and other employers from entering into or enforcing any new noncompete. But on Aug. 20, a federal court struck down the sweeping noncompete ban, claiming it was "unreasonably overbroad" and that the FTC lacks authority to implement nationwide rules defining unfair methods of competition. The rule would have taken effect Sept. 4.
The FTC told Becker's it is considering an appeal of the ruling, which has received mixed reactions from hospital and physician groups.
The American Academy of Family Physicians, which has more than 130,000 members, said it is disappointed by the decision to block the rule nationwide.
"Noncompetes harm family physicians and their patients by jeopardizing long-term patient-physician relationships and creating an uneven playing field for physicians," AAFP President Steven Furr, MD, said in a statement. "The AAFP will continue to support the FTC's mission to eliminate noncompetes in healthcare that prioritize the interests of organizations over those of patients and their physicians."
However, organizations such as the Federation of American Hospitals and the American Hospital Association told Becker's they stand by the federal court's decision.
Despite the FTC's attempt to create a national ban, several states have introduced or passed noncompete ban bills. All of them were introduced in the first half of 2024. Here are the five states where bills were passed:
Illinois: Starting Jan. 1, noncompetes for licensed professionals who provide mental health services to veterans and first responders are unenforceable.
Iowa: Healthcare technology platforms may not restrict the employment opportunities via a noncompete clause for independent nursing professionals.
Louisiana: Starting Jan. 1, noncompetes restricting primary care physicians from practicing medicine will expire three years from the effective date of the agreement and new agreements or renewals cannot include a noncompete. If employment is terminated within three years, the scope of the noncompete must be limited to two years in duration and up to two contiguous parishes where the practice is located.
Pennsylvania: Starting Jan. 1, noncompetes between healthcare practitioners and employers are limited to one year in duration and are unenforceable if the employee is dismissed by the employer. Healthcare practitioners include physicians, nurse anesthetists, nurse practitioners and physician assistants.
Rhode Island: Noncompetes for advanced practice registered nurses are void and unenforceable.
Bills have also been introduced in Arizona, Georgia, Kentucky, Missouri, New York, Rhode Island and Tennessee. Colorado, Mississippi and Nebraska introduced noncompete bans that failed.