A Texas federal judge has issued a nationwide injunction blocking the implementation of the Federal Trade Commission's noncompete ban, which would have invalidated tens of millions of existing noncompete agreements and prohibited employers from entering into or attempting to enforce any new noncompetes.
In an Aug. 20 ruling, U.S. District Judge Ada Brown said the FTC's noncompete ban is "unreasonably overbroad without a reasonable explanation," siding with tax preparation company Ryan LLC and the U.S. Chamber of Commerce, both of which argued that the FTC lacks authority to implement rules defining unfair methods of competition.
Ms. Brown temporarily blocked the ban in July, but her Aug. 20 decision makes that injunction permanent across the U.S.
The American Hospital Association and the Federation of American Hospitals filed an amicus brief in July urging the court to vacate the final rule.
The hospital groups had pushed the FTC to limit the reach of its authority specifically for the healthcare industry. Pointing to hospitals registered under section 501(c) of the Internal Revenue Code claiming tax-exempt status as nonprofits, the AHA argued that these entities are outside the FTC's jurisdiction — a claim the FTC refutes.
AHA General Counsel and Secretary Chad Golder described the noncompete rule as a "breathtaking assertion of regulatory power" by three unelected commissioners who "did not attempt to understand the disruptive impact it would have on hospitals, health systems and the patients they serve."
"We are pleased that Judge Brown vindicated what the AHA predicted when this unlawful regulation was first released — the 'only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals' ability to care for their patients and communities,'" Mr. Golder said in an Aug. 20 statement shared with Becker's.
U.S. Chamber of Commerce President and CEO Suzanne Clark also said the ruling was a "significant win" in its fight against government micromanagement of business decisions.
"A sweeping prohibition of noncompete agreements by the FTC was an unlawful extension of power that would have put American workers, businesses and our economy at a competitive disadvantage," Ms. Clark said in a statement. "We remain committed to holding the FTC — and all agencies — accountable to the rule of law, ensuring American workers and businesses can thrive."
The FTC told Becker's it is "disappointed" in the court's decision, which does not prevent the agency from addressing noncompetes through case-by-case enforcement actions, but it is considering a potential appeal.