FTC drops appeals of noncompete ban

The Federal Trade Commission on Sept. 5 voted 3-1 to dismiss its appeals in two legal challenges to its 2024 rule banning noncompete agreements in employment contracts.

On Sept. 5, the agency dismissed appeals in Ryan, LLC v. FTC and Properties of the Villages v. FTC and acceded to the vacatur of the noncompete rule, which a Texas federal judge struck down in August 2024. The rule would have invalidated tens of millions of existing noncompete agreements and prohibited employers from entering into or attempting to enforce any new noncompetes.

FTC Chair Andrew Ferguson and Commissioner Melissa Holyoak, who both dissented when the rule was first issued, argued the agency had exceeded its authority, noting the rule would have preempted state laws, voided more than 30 million contracts and redistributed “nearly a half trillion dollars of wealth within the general economy.” 

The commission’s decision follows strong opposition from the healthcare sector. The American Hospital Association and the Federation of American Hospitals filed a friend-of-the-court brief earlier in February urging nationwide vacatur of the rule, arguing it would “create significant distortions in the healthcare labor market because the commission lacks the statutory authority to apply the rule to nonprofit hospitals.”

Chip Kahn, president and CEO of the Federation of American Hospitals, previously described the policy as a “double whammy” for hospitals. “The ban makes it more difficult to recruit and retain caregivers to care for patients, while at the same time creating an anticompetitive, unlevel playing field between taxpaying and tax-exempt hospitals,” Mr. Kahn said in April.

“The ban makes it more difficult to recruit and retain caregivers to care for patients, while at the same time creating an anticompetitive, unlevel playing field between taxpaying and tax-exempt hospitals — a result the FTC rule precisely intended to prevent,” Mr. Kahn said in a statement shared with Becker’s. “In a time of constant healthcare workforce shortages, the FTC’s vote today threatens access to high-quality care for millions of patients.”

The AHA also warned that a one-size-fits-all approach across industries would worsen ongoing workforce shortages.

While the FTC’s rule will not take effect, Mr. Ferguson said the commission under current leadership will continue to pursue enforcement actions against what it views as unlawful noncompete agreements through antitrust laws.

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