By Greg Care

Litigation is continuing over whether the Federal Trade Commission (FTC) has properly banned nearly all employment non-compete provisions nationwide. As discussed in a prior update, one of the three cases (ATS Tree Services, LLC v. Federal Trade Commission, where the FTC won an initial fight) was dismissed by the rule’s challengers, so the two leading cases that are left are proceeding on appeal. I’ll review some updates on those and what to watch for.

It appears that the appeal being heard by the Eleventh Circuit will be the first to have all briefing completed, but not necessarily the first to have an oral argument or decision. This appeal derives from the decision in Properties of the Villages, Inc. v. Federal Trade Commission, No. 5:24-cv-00316 (M.D. Fla.) that the FTC’s rule violated the “major questions doctrine,” and thus could not be enforced against the named plaintiff.

In the Eleventh Circuit, the FTC has submitted its opening brief and the Properties of the Villages, Inc. has gotten two extensions of time to file its response brief—now due on January 15, 2025. The FTC’s reply brief would ordinarily be due three weeks thereafter. While the Eleventh Circuit tends to decide appeals without an oral argument more often than her sister circuits, per judiciary statistics, I believe it is very likely that this consequential matter will get an oral argument.

In the meantime, the case is generating and will continue to generate a number of third-party submissions who are weighing in on this issue in an attempt to persuade the judges. In total, nine different amicus curiae (“friend of the court”) briefs have been filed in support of the FTC’s appeal, including briefs from NYU Langone Health, the American Federation of Teachers, and a group of 17 states as well as the District of Columbia (New Jersey, California, Colorado, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Nevada, New Mexico, New York, Oregon, Pennsylvania, Rhode Island, Vermont, and Washington). I expect that a good number of additional amicus briefs will be filed in support of the Properties of the Villages, Inc. after it files its brief.

Given my interest in employment issues that concern physicians and other healthcare professionals, I found it interesting that several of the amicus briefs pointed out the harms caused by non-competes in the healthcare field. NYU Langone Health’s brief argued that non-competes in medicine harm patient care, negatively affect physicians, and chill innovation. The various states and D.C. made similar points, noting that physicians are often trapped by non-competes that greatly disincentivize moving one’s family and separating from patients to escape the geographic dead zone of the non-compete. This, in turn, leads to less competition and resulting higher costs of care. On this score, the brief from the Small Business Majority and Professor Evan Starr noted a study finding that, in the healthcare context, “noncompete enforcement has directly led to higher prices and increased market concentration.” The American Federation of Teachers recounted stories from those in the healthcare industry and their patients who have been adversely affected.

Thus, it is not surprising that there has been movement in various states to end or curtail non-competes in medicine. I’ve written about Maryland’s legislation on that, and there are several other states with laws on the books with others being added, such as Pennsylvania’s Fair Contracting for Health Care Practitioners Act. However, as was argued in the amicus brief of the various states and D.C., the patchwork of varying laws leads to confusion, especially in multi-state labor markets where hospitals and health systems serve patients and employ practitioners from more than one state. And various amici noted that the status quo of litigation addressing one non-compete provision at a time is an inefficient solution to policing unreasonable non-competes.

Elsewhere, the Fifth Circuit will be deciding the appeal in Ryan LLC v. Federal Trade Commission, but the FTC’s opening brief is not due until January 2, 2025. It will take a few months for the briefing to be completed.

In several weeks, the Maryland Health Care Commission (MHCC) is due to report its findings and recommendations on several healthcare-related issues that were posed in HB 1388, the law that abolished non-competes for veterinarians and healthcare providers making $350,000 or less per year and limited non-competes for healthcare providers making more money. MHCC is contracting with the Brown University School of Public Health to study the impact of private equity and separately contracting with The Hilltop Institute of the University of Maryland Baltimore County to study the dynamics and consequences of insurer market concentration as well as the impact of health systems’ and healthcare plans’ ownership of physician practices and health care facilities. MHCC recently closed a comment period on acquisitions of different provider entities, especially physician practices and ambulatory surgery centers. All of these topics related back to arguments that have been raised in opposition to non-competes, particularly the concentration of providers under the control of a few entities that can stifle labor mobility amongst healthcare providers. The forthcoming report to the Senate Finance Committee and the House Health and Government Operations Committee could be a springboard to further legislative or regulatory changes in this space.

If you have questions regarding non-competes in your situation, please contact us today to see if we can assist with your particular circumstances.

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