Texas federal court blocks FTC's Non-Compete Clause Final Rule; judge rules FTC lacked authority, deems rule arbitrary and capricious

A Texas federal court Aug. 20 ruled set aside the Federal Trade Commission’s Non-Compete Clause Final Rule. U.S. District Judge Ada Brown held the FTC lacked the authority to enact the rule, which 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 court also held that the rule “is arbitrary and capricious because it is unreasonably overbroad without a reasonable explanation.” The FTC rule was set to take effect Sept. 4.

“The AHA welcomes Judge Brown’s decision setting aside the FTC’s non-compete rule nationwide,” said Chad Golder, AHA’s general counsel and secretary. “As the AHA explained in both its comment letter and amicus brief, the rule was a breathtaking assertion of regulatory power by three unelected Commissioners, made worse by the fact that the Commissioners did not attempt to understand the disruptive impact it would have on hospitals, health systems, and the patients they serve. We are pleased that Judge Brown vindicated what the AHA predicted when this unlawful regulation was first released — the ‘only saving grace is that this rule will likely be short-lived, with courts almost certain to stop it before it can do damage to hospitals’ ability to care for their patients and communities.’”