On July 3rd, 2024, the US District Court of Northern Texas issued a preliminary ruling in the Ryan LLC v. Federal Trade Commission that prevents the FTC's ban on noncompete agreements from going into effect on September 4th for Ryan LLC, the US Chamber of Commerce, the Business Roundtable, the Texas Association of Business, and the Longview Chamber of Commerce. Judge Ada Brown will issue a more detailed ruling by the end of August 2024, but in the meantime, the Federal Trade Commission ruling that would ban noncompete agreements remains in place for all entities except those involved in the lawsuit.

In her ruling, Judge Ada Brown found that the "FTC lacks substantive rulemaking authority," stating that "The issue presented is whether the FTC's ability to promulgate rules concerning unfair methods of competition includes the authority to create substantive rules regarding unfair methods of competition," and that "the text, structure, and history of the FTC Act reveals that the FTC lacks substantive rulemaking authority with respect to unfair methods of competition."  Further on in her ruling Judge Brown said that the "plaintiffs are likely to succeed on the merits and would be harmed if the rule takes effect." 

After the ruling, the FTC issued a statement saying, "The FTC stands by our clear authority, supported by statute and precedent, to issue this rule."  

A similar lawsuit in Pennsylvania was filed by a tree-trimming business and a ruling is expected in that case by the end of July.  

The Supreme Court's recent decision to end Chevron Deference, which limits the extent and scope that federal agencies can issue regulations further complicates how the lower courts will ultimately rule on the FTC's ruling on noncompete clauses.  

SCAI supports getting rid of noncompete agreements as they are designed, as they stifle economic growth, force people to stay in jobs or work for companies they don't want to anymore, have onerously burdensome financial penalties, and make people move hundreds or thousands of miles away from their home to make a living. Noncompete agreements are, by definition, anti-competitive. Noncompete agreements create four issues that uniquely impact healthcare. 1. Disrupt the physician-patient relationship; 2. Limit patient access to care in rural areas; 3. Reduce competition in healthcare markets, which favors large providers, and 4. Raise healthcare costs. This is why SCAI supports the bipartisan Workforce Mobility Act of 2023, S.220/H.R.731. Some key components of the Workforce Mobility Act include: 

• Broadly and across industries prevents a person from entering into or enforcing a noncompete agreement with any individual who is employed by, or performs work under contract with, such person with respect to the activities of such person in or affecting commerce. 
• Allows for businesses to continue to enter into agreements when buying another business or practice to restrict the seller from creating a similar entity within a specified geographic area.  
• Continues the practice of allowing noncompete agreements with Senior Executive Officials who have a severance agreement.  
• Doesn't do anything to prevent companies from entering into agreements to prevent the disclosure of trade secrets or other proprietary information. 

Because the outcomes of these federal district court rulings may create a split between the jurisdictions, the likelihood that the U.S. Supreme Court has to take up the matter is increased.