Federal District Court Strikes Down FTC Noncompete Ban
On August 20, 2024, a federal district court judge in Texas struck down the Federal Trade Commission’s (FTC’s) rule banning noncompete clauses in employment agreements. The ruling was released 15 days before the final rule was expected to take effect on September 4, 2024. U.S. District Judge Ada Brown ruled that the FTC does not have the authority to issue substantive rules regarding unfair methods of competition. In her order, Judge Brown stated, “The Court concludes that the FTC lacks statutory authority to promulgate the Non-Compete Rule, and that the Rule is arbitrary and capricious. Thus, the FTC’s promulgation of the Rule is an unlawful agency action.” The FTC previously issued a final rule on April 23, 2024, that would have prohibited for-profit companies from utilizing noncompete agreements for most employees. FTC said that the rule was “expected to lower health care costs by up to $194 billion over the next decade.” Though not determined, an appeal is likely. The FTC final rule is available here. The district court opinion is available here.
Impact on General Dentistry: AGD applauds the recent ruling as the FTC noncompete ban could have caused widespread harm for dentists and other medical practices. When the rule was first proposed, AGD released a comment letter, asserting that “Noncomplete clauses are fundamental business tools that are not unique to the dental practice. Modifications to existing laws and regulations, especially those with such far-reaching implications, require thoughtful and deliberative consideration. Proposed changes to the noncompete rule by the FTC is a departure from hundreds of years of legal precedent in the U.S and represents remarkable broad authority over legal arrangements by a governmental agency. Additionally, the proposed ruling neither clarifies the need for such changes, nor does it cite a controlling statute stipulating authority for abrogating existing law. Therefore, the AGD requests an immediate reconsideration and withdrawal of the proposed rule to ban noncompete clauses at this time.” AGD will continue monitoring any similar rules released by the FTC or other federal agencies.
Impact on General Dentistry: AGD applauds the recent ruling as the FTC noncompete ban could have caused widespread harm for dentists and other medical practices. When the rule was first proposed, AGD released a comment letter, asserting that “Noncomplete clauses are fundamental business tools that are not unique to the dental practice. Modifications to existing laws and regulations, especially those with such far-reaching implications, require thoughtful and deliberative consideration. Proposed changes to the noncompete rule by the FTC is a departure from hundreds of years of legal precedent in the U.S and represents remarkable broad authority over legal arrangements by a governmental agency. Additionally, the proposed ruling neither clarifies the need for such changes, nor does it cite a controlling statute stipulating authority for abrogating existing law. Therefore, the AGD requests an immediate reconsideration and withdrawal of the proposed rule to ban noncompete clauses at this time.” AGD will continue monitoring any similar rules released by the FTC or other federal agencies.