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Update: FTC Ban of Noncompetes Blocked

Published in Government Relations on August 22, 2024

Earlier this year, the FTC published a final rule that sought to ban most types of noncompete agreements used by businesses in several industries, including our healthcare industry. The proposed ban would not have prohibited noncompete agreements related to the sale of a business. It would, however, have banned most noncompete agreements between businesses and most staff, which are very commonplace in the DMEPOS industry, especially for skilled or licensed/credentialed staff (ATPs, RTs, RNs, CPEDs, etc.).

Their final rule was published in April, and the ban on noncompete agreements was scheduled to go into effect in September of 2024. VGM published a summary of the final rule in May. As we mentioned in our summary of the final rule, the noncompete ban was met immediately with legal challenges from entities and industries alike. On Tuesday, August 20, Judge Ada Brown, a federal judge from the U.S. District Court in Texas, ruled that the FTC overstepped their statutory authority in the final rule and said that the ban was “arbitrary and capricious,” unreasonably overbroad, and lacked a reasonable explanation.” Judge Brown also cited that the ban in its proposed form would cause irreparable harm.

The ruling this week means that the ban on noncompete agreements cannot and will not go into effect in September. The FTC has not yet said whether they will appeal the decision, but Victoria Graham, a spokesperson for the FTC, said they are considering that option. The FTC could also choose to address noncompete agreements in a different manner, perhaps through enforcement actions.

If this is appealed further and based on some conflicting rulings in other states regarding noncompete agreements, it is possible this issue could make it to the Supreme Court. For the time being, companies are still at liberty to utilize noncompete agreements in their day-to-day business dealings with their employees. VGM will continue to monitor this topic and will issue further communications regarding any changes in the enforceability, timeline, or anything else related to this ban of noncompete agreements.

If you have questions or need additional information, please reach out to craig.douglas@vgm.com or alan.morris@vgm.com.

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