Hospitals, Insurance Companies, Unite to Stop Non-Compete Bans - What They Don't Want You to Know!
The FTC's rule prohibiting noncompetes went into effect on September 4
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A Texas judge will make a final decision on the challenge on August 30
Trade groups representing the hospital, insurance and financial services industries are pushing the court to block the Federal Trade Commission's non-competitive ban amid divisions in the judicial system over the authority of regulators.
The American Hospital Association and the American Hospital Federation, which each represent thousands of US hospitals and health systems, filed a brief Monday in the US District Court for the Northern District of Texas challenging the rule.
The American Property Casualty Insurance Association also filed a brief in the Texas case calling for an injunction against the FTC. Meanwhile, groups including the American Investment Council and the Managed Funds Association, filed a brief in the Middle District of Florida in support of a separate challenge to the non-compete rule. Many of these groups argue that the FTC does not have the legal authority to issue such regulations, and at the same time argue that noncompete contracts are a useful way to protect training investments and safeguard confidential information.
Hospital associations also highlight some unique dynamics in the industry, where the majority of hospitals are nonprofit organizations. The FTC does not have the legal authority to apply the non-competition rule to for-profit hospitals, meaning the rule would create an “unequal playing field” in the health care labor market, they said.The push from the industry comes as judges across the US consider lawsuits against the FTC's rules, which would largely prohibit companies from using contracts that limit employees' ability to change jobs.
Judge Kelley Brisbon Hodge of the Eastern District of Pennsylvania on July 23 ruled that the FTC had the authority to issue the rule, and denied the challenger's motion for a preliminary injunction. Weeks earlier, Texas Judge Ada Brown reached the opposite conclusion when granting a preliminary injunction against a tax company and the U.S. Chamber of Commerce.
Brown said he will make a final decision on the merits by Aug. 30, just days before the FTC rule takes effect. Plaintiffs in the case are also seeking a nationwide injunction. A judge in Florida has not yet ruled on a real estate company's motion to issue an injunction.
About 30 million Americans—or one in five workers—are subject to noncompete contracts, according to FTC estimates. The agency argues that non-competes impose heavy burdens on workers and eliminating them would increase opportunities and raise wages.
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