Noncompete Ban Unlikely to Survive Under Trump: Experts

Even before the presidential election, the Federal Trade Commission’s (FTC) national ban on noncompete clauses faced a tough battle for survival in the courts. 

Now, legal specialists forecast a grim prognosis for the ban under Donald Trump’s return to the White House.

In April 2024, a divided FTC board approved a rule that would ban most noncompete agreements, which are the bane of many physicians in the states where they’re allowed. 

But a federal district’s court ruling put the ban on hold, and the Trump administration isn’t expected to support lifting the ban. 

“It is likely that the Trump administration will decline to defend the rule and may not even appeal the district court’s ruling, which means that the ban on non-competes will not go into effect,” Steven Lubet, JD, a professor emeritus at Northwestern University Pritzker School of Law, Chicago, told Medscape.

What’s in a Noncompete Clause?

Noncompete clauses in employee contracts typically restrict when and where workers can take future jobs. In medicine, supporters argue that the clauses are fair. Hospitals and practices provide a base of patients to physicians, they say, in return for their agreement not to go work for a competitor. 

But those opposed to these clauses argue that the restrictions harm careers and hurt patients by unfairly preventing physicians from moving to new jobs where they’re needed. 

At an April meeting, the FTC board voted 3 to 2 to ban noncompete clauses; some nonprofit organizations and senior executives were expected to be exempt. The FTC estimated that the move would save the healthcare system alone as much as $194 billion over 10 years. 

“A pandemic killed a million people in this country, and there are doctors who cannot work because of a noncompete,” declared FTC Commissioner Alvaro Bedoya. 

Hospitals protested the move. In a statement, the general counsel for the American Hospital Association called it “bad law, bad policy, and a clear sign of an agency run amok” and said the FTC ignored “mountains of contrary legal precedent and evidence about its adverse impacts on the health care markets.”

Although the AMA does not support a total ban, its House of Delegates adopted policies last year to support the prohibition of noncompete contracts for physicians employed by for-profit and nonprofit hospitals, hospital systems, or staffing companies. 

Texas Federal Judge Intervenes to Halt Ban

The ban was supposed to take effect on Sept. 4, 2024. But Texas federal judge Ada E. Brown struck down the ban in an Aug. 20 decision. She ruled that the FTC went beyond its authority.

“The district court based its ruling on a very dubious distinction between ‘unfair practices,’ which the FTC may prohibit, and ‘unfair competition,’ which, according to the court, it may not,” said Lubet, the Northwestern University law professor. 

In fact, the ban should stand, he said. “This is a classic case of the government intervening on behalf of consumers/patients by prohibiting an unfair and harmful employment practice,” Lubet said. 

Amanda Hill, an attorney in Austin, Texas, who trains physicians about how to negotiate contracts, has a different take. “The Federal Trade Commission came down hard, and honestly, it really overstepped,” she told Medscape Medical News. “Congress needs to write laws, not regulatory bodies. I think all the lawyers went, ‘Good try, but you’re not going to get anywhere with that.’”

She noted that physicians themselves are divided over the value of noncompete clauses. “I would say 80% of my clients can’t stand noncompetes.” But another 20% own their own practices and hate the idea of losing their physicians to competitors, she said. 

Trump Isn’t Seen as Likely to Support Ban

While the Biden Administration firmly supported a ban on noncompete clauses, there isn’t a strict Democratic-Republican divide over whether the agreements are a good idea. Some red states have embraced bans, and Hill said this can make sense from a Republican point of view: “We don’t want to run doctors out of town and out of the state because they think they’re going to be bound by big hospitals and corporate interests.”

In fact, former Florida congressman Matt Gaetz, a Republican briefly tapped as President-Elect Trump’s nominee for attorney general, supports noncompete clauses. He filed a friend-of-the-court brief with the Texas judge that supported the FTC’s ruling, saying it is a “vindication of economic freedom and free enterprise.” 

But Republicans generally “believe that federal agencies are going too far and beyond the power granted to them by Congress,” Atlanta attorney Benjamin Fink, Esq., told Medscape Medical News.

And Trump is no fan of the FTC and its chair, Lina Khan, who may step down. Observers don’t expect that the Trump Administration or a newly constituted FTC board will support an appeal of the Texas judge’s ruling.

“I don’t think anybody else — another agency or a private party — could step in place of the FTC if the FTC declines to defend the ban,” Atlanta attorney Neal F. Weinrich, Esq., told Medscape Medical News. In that case, he said, “I think it ends.”

Attorneys Weinrich and Fink work at the same firm, which handles noncompete agreements for physicians. 

Noncompete Ban Advocates Turn to States 

Even if Kamala Harris had won the presidency, a national ban on noncompete clauses would have faced an uphill battle at the US Supreme Court. 

“The Supreme Court majority has been unsympathetic to administrative agencies, interpreting their authority very narrowly,” said Northwestern University’s Lubet.

So what happens to noncompete clauses now? While bipartisan bills in Congress have tried to ban them, legislation is unlikely to pass now that Republicans will control both the House and Senate, Fink said. 

According to a recent article in the Journal of the American College of Cardiology, 12 states prohibit noncompete clauses for physicians: Alabama, California, Colorado, Delaware, Massachusetts, Montana, New Hampshire, New Mexico, North Dakota, Oklahoma, Rhode Island, and South Dakota. 

The remaining states allow noncompetes in some form, often excluding them for employees earning below a certain threshold. For example, in Oregon, noncompete agreements may apply to employees earning more than $113,241. Most states have provisions to adjust the threshold annually. The District of Columbia permits 2-year noncompetes for “medical specialists” earning over $250,000 annually. 

Indiana employers can no longer enter into noncompete agreements with primary care providers. Other specialties may be subject to the clauses, except when the physician terminates the contract for cause or when an employer terminates the contract without cause. 

“I definitely think states are going to continue to restrict the use of noncompetes,” Fink said. 

Lubet has no disclosures. Hill, Fink, and Weinrich represent physicians in contract negotiations. 

Randy Dotinga is an independent writer and board member of the Association of Health Care Journalists.