FTC Noncompete Ban Overturned, But Doctors Can Fight Locally

Doctors have waited to see how the Federal Trade Commission’s rule on banning noncompetes would play out in courts. With a federal judge’s decision last week to block the ban, the wait is now over.

Although the ruling is legally justified, it means doctors will continue to face professional challenges that noncompetes present. They should fight for reasonable and narrowly tailored agreements, considering that noncompetes are unlikely to go away anytime soon.

Judge Ada Brown of the US District Court for the Northern District of Texas ruled in favor of the plaintiff in the much-anticipated Ryan LLC v. FTC case. The court stated that the FTC doesn’t have the authority to ban practices it deems unacceptable. Brown went on to say the FTC exceeded its statutory authority in implementing this rule and stated the ban was arbitrary and capricious.

This isn’t unexpected, especially given that the US Supreme Court has opened the door for challenges of agency opinions after overturning the Chevron line of cases in Loper Bright and Corner Post.

Brown quoted one of those cases by affirming that the Administrative Procedures Act, which allows a court to set aside certain agency decisions, was designed to be a “check on administrators whose zeal might otherwise have carried them to excelled not contemplated in legislation creating their offices.”

I heard from many doctors across the country who were ecstatic that this ban was being contemplated, regardless of the lack of legal authority, and are sad to see it go. Doctors feel the strain of having to move and navigate a complex set of rules and job restrictions upon exit, and this is a common pain point among health-care clients.

However, hospitals still contend that they need noncompetes to keep competitive. Many large systems pay recruitment costs and even buyouts to lure doctors, so they argue they’re just protecting their investments. But that argument often rings hollow to a doctor, who isn’t hauling off trade secrets or showcasing financial data to a competing group.

These employed physicians are doing the job they were trained to do, and often aren’t involved on the board or executive level. They are using skills and training they have learned over decades of study to treat and operate on patients.

Arguably, there is a time and place for noncompetes in private practice. They are designed to protect an employer’s trade secrets, confidential information, and legitimate business interests.

For example, if an independent family practice hires a physician or advanced practice provider and trains them, allowing them to build up a solid patient base, the practice is going to add a noncompete to the contract. It wants to protect against the provider leaving after a year and starting a practice down the street, taking all the patients and knowledge with them. Without any protections in place, the practice in essence would be financing their future competitor.

In these cases, narrowly tailored noncompetes serve a purpose. But even then, it should be around the practice where the provider works—not every location of the practice, which may cover a large metropolitan area. An overly broad noncompete provision doesn’t do anything but increase hospital monopolies.

As much as doctors may not like the ultimate outcome, the Ryan ruling makes legal sense. The FTC did overreach. But many doctors believe noncompetes are oppressive and stop their freedom of movement and work. This makes it even more important for them to fight at the local level for narrowing and limiting noncompetes.

Ryan isn’t the only case on this issue, but it may be the last. Because courts are split on the matter, it’s surely heading to the Supreme Court soon, which will add to the line of cases regarding agency decision-making. Given the recent rulings and leaning of the current court, my bet is that the Ryan case will be upheld.

One thing is clear—noncompetes are now a huge discussion point. We need doctors to freely practice and move around to treat our citizens. Let’s not make it harder for them to do so. We need to mobilize locally to create reasonable and narrowly tailored noncompetes for private practices but release the chokehold hospitals have on doctors.

Doctors should work at the state level to have fair and reasonable noncompete legislation, push back on unreasonable noncompetes from larger employers, and advocate for reasonable covenants with narrow circumstances.

If we don’t help doctors fill the gaps in health care, then everyone suffers.

The case is Ryan LLC v. FTC, N.D. Tex., No. 3:24-cv-00986, decided 8/20/24.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Amanda Hill is the owner and founder of Hill Health Law Group and has nearly 25 years of health-care law expertise.

Write for Us: Author Guidelines