AHA seeks to vacate FTC noncompete ban in Texas federal court; hospitals argue the rule creates anticompetitive distortions and uneven regulation in health care

The AHA and the Federation of American Hospitals filed an amicus brief in a Texas federal court July 26, asking the court to vacate the Federal Trade Commission's Non-Compete Clause Final Rule. The rule would ban as an unfair method of competition contractual terms that prohibit workers from pursuing certain employment after their contract with an employer ends. The FTC failed to address the AHA and other parties' concerns or consider alternatives more narrowly tailoring the rule, the brief notes, and that hospitals would face uneven regulation that would create "significant, unintended and anticompetitive distortions" in health care.  

“The Commission’s treatment of the hospital labor market underscores why the Final Rule was not supported by relevant evidence, lacked a reasonable explanation, and did not consider proffered alternatives,” the brief explained. In addition, the brief argued that “there is only one appropriate remedy: vacatur of the Final Rule.... Accordingly, this Court should set aside the Non-Compete Rule, which will ensure that hospital labor markets are not adversely distorted by the Commission’s unlawful, arbitrary and capricious Final Rule.” 

On July 3, this court granted plaintiffs’ motion to stay and preliminarily enjoin the Sept. 4 effective date of the rule. The court has said that it will issue a final decision on the merits, following this briefing, by the end of August. Meanwhile, last week a Pennsylvania court rejected an attempt to block the rule, writing that the FTC is within its authority to designate all non-compete clauses as "unfair methods of competition."