Hospital Argues Against FTC Non-Compete Ban

The American Hospital Association (AHA) and Federation of American Hospitals (FAH) have filed an amici curiae brief in the lawsuit attempting to overturn a May 2024 Federal Trade Commission rule banning most non-compete restrictions on employees.

The healthcare industry said that it faces severe skilled labor shortages that differ between nonprofit and taxpaying hospitals, which could result in “significant distortions” in competition.

The case, known as Ryan LLC, et al. v. Federal Trade Commission, is a lawsuit attempting to overturn the FTC’s non-compete rule that says such restrictions are “an unfair method of competition” between companies. The agency pointed to “empirical research showing that they tend to harm competitive conditions in labor, product, and service markets” and has estimated such contracts cover one in five workers.

Many businesses and trade organizations argue the FTC lacks the authority to promulgate the rule, as Bloomberg Law reported. Also, they claim that non-competes allow businesses to protect confidential information and protect investments in training.

Businesses and organizations have filed multiple lawsuits against the FTC. There have been contrasting rulings so far. Judge Kelley Brisbon Hodge of the Eastern District of Pennsylvania said the FTC did have the authority. A few weeks before, Texas Judge Ada Brown ruled that the agency didn’t have the authority.

The AHA and FAH respectively represent 5,000 and 1,000 hospitals. In a public comment on the rule, the AHA said the rule “would instantly invalidate millions of dollars of existing contracts, while exacerbating problems of health care labor scarcity, especially for medically underserved areas like rural communities.”

The two groups also say that the FTC’s authority might extend to taxpaying hospitals, but not to non-profit and tax-exempt institutions, putting their for-profit members at a competitive disadvantage. It’s a twist on previous arguments against the rule. The associations say that the rule as written “could significantly disrupt health care labor markets regardless of hospital ownership type.”

The AHA and FAH also argued that an alternative to the rule could be a version that exempts “highly-skilled, highly compensated workers like physicians and senior executives.”