Is Your Noncompete Valid?

Noncompete agreements restricting individuals from joining competitors or starting similar businesses after leaving an employer, have long been a contentious issue in the American healthcare industry. These clauses were historically used to protect investments in training, trade secrets, and patient relationships. However, they also limited healthcare professionals’ mobility, potentially affecting wages, innovation, and patient access to care. In April of last year, 2024, the Federal Trade Commission (FTC) announced a nationwide ban on noncompete agreements, set to take effect on September 4, 2024, aiming to enhance worker mobility, increase wages, and reduce healthcare costs. However, legal challenges halted the rule’s implementation, leaving noncompetes enforceable under varying state laws. This article examines the efficacy of noncompete agreements in American healthcare since the attempted September 2024 ban, exploring their impact on providers, patients, and the industry amidst an evolving legal landscape.

Background on the FTC’s Noncompete Ban

On April 23, 2024, the FTC voted 3-2 to issue a final rule banning noncompete agreements nationwide, citing their role in suppressing wages, stifling innovation, and limiting job mobility. The rule prohibited new noncompetes for all workers and rendered existing agreements unenforceable, except for senior executives earning over $151,164 annually in policy-making roles. The FTC estimated banning noncompetes could reduce healthcare costs by $74–194 billion over a decade, increase worker earnings by $524 on average, and boost new business formation by 2.7% annually. In healthcare, where 37–45% of physicians and many other providers and caregivers faced such restrictions, the ban was expected to enhance provider mobility and patient access, particularly in underserved areas.

However, on August 20, 2024, a federal court in Texas struck down the rule, arguing the FTC lacked authority to enact such a broad regulation. The FTC appealed to the Fifth Circuit, but as of July 2025, the appeals process remains ongoing, with a potential Supreme Court review looming. Additionally, on March 7, 2025, the FTC moved to stay its appeals for 120 days, citing a change in administration and uncertainty about continued defense of the rule under new leadership. Consequently, the nationwide ban never took effect, leaving noncompete enforcement to state laws and case-by-case judicial rulings.

State-Level Developments and Healthcare-Specific Restrictions

With the federal ban blocked, noncompete agreements remain governed by state laws, which have increasingly restricted their use, particularly in healthcare. As of June 2025, four states—California, Minnesota, North Dakota, and Oklahoma—have fully banned noncompetes, while 34 states and Washington, D.C., impose restrictions, often targeting healthcare professionals. Since September 2024, several states have enacted or proposed healthcare-specific legislation:

• Pennsylvania: The Fair Contracting for Health Care Practitioners Act (Act 74), effective January 1, 2025, limits noncompetes for healthcare providers to one year after voluntary departure, without geographic restrictions. This law aims to increase provider mobility while balancing employer interests.
• Maryland: Effective July 1, 2025, Maryland bans noncompetes for healthcare professionals earning $350,000 or less and restricts those for higher earners to one year and a 10-mile radius from their primary workplace. This targets veterinarians, nurses, physicians, and others providing direct patient care.
• Louisiana: New laws effective in 2025 restrict noncompetes for certain healthcare professionals, aligning with a trend to limit their scope in medical fields.

These state-level reforms reflect growing recognition of noncompetes’ adverse effects, such as reduced job mobility and wage suppression. For example, a study cited by the Pennsylvania Health Care Cost Containment Council found an 8.1% decrease in job mobility for inventors in Michigan after noncompete enforcement tightened, with a 16.2% drop for those with specialized skills, suggesting that restrictions like Pennsylvania’s Act 74 could enhance provider mobility.

Efficacy of Noncompetes in Healthcare: Current Evidence

Since the federal ban’s failure, noncompetes continue to shape the healthcare landscape, with mixed efficacy depending on perspective:

Impact on Healthcare Providers

Noncompetes historically limited physicians’ and other providers’ ability to switch employers or start practices, particularly in rural areas where employers leveraged scarce job options to enforce restrictive clauses. The American Medical Association notes that 37–45% of physicians are bound by noncompetes, often feeling coerced due to unequal bargaining power. Without a federal ban, these restrictions persist in many states, potentially suppressing wages and career advancement. For example, the FTC argued that noncompetes depress wages even for workers not directly bound by them, as they reduce competitive job offers. However, state bans and restrictions, like those in Maryland and Pennsylvania, have begun to alleviate these constraints, allowing greater mobility for providers in those regions. Early data from states with bans, like California, suggests increased physician movement and practice formation, though comprehensive post-2024 data is limited.

Impact on Patient Care

Critics argue that noncompetes harm patient care by disrupting continuity and limiting access to preferred providers. The American College of Surgeons and others have noted that noncompetes can force physicians to relocate or leave the field, reducing specialist availability, especially in underserved areas. The FTC’s projected $74–194 billion in healthcare cost savings over a decade hinged on increased competition and provider mobility. While the federal ban’s blockage limits nationwide impact, state-level reforms show promise. For instance, Pennsylvania’s Act 74 could improve patient access by allowing providers to stay in their communities post-employment, though its one-year restriction still poses some limitations compared to full bans.

Impact on Employers

Healthcare employers, particularly for-profit hospitals and private equity-backed practices, rely on noncompetes to protect investments in training, proprietary knowledge, and patient relationships. The American Hospital Association opposed the FTC’s ban, arguing it could exacerbate workforce shortages by enabling providers to leave without notice, disrupting care delivery. With the ban overturned, employers in states without restrictions can continue using noncompetes, but they face challenges in states like Maryland, where tight limits apply. Employers are adapting by emphasizing non-disclosure agreements (NDAs) and non-solicitation clauses, which the FTC noted are viable alternatives for protecting sensitive information without restricting mobility. Over 95% of workers with noncompetes already have NDAs, suggesting a shift toward these tools.

Legal and Economic Considerations

The blocked federal ban has shifted scrutiny to state courts and legislatures. For example, the Delaware Supreme Court’s December 2024 ruling in Sunder Energy, LLC v. Tyler Jackson invalidated an overly broad noncompete, signaling a trend toward stricter judicial review. Economically, noncompetes are linked to wage suppression and reduced innovation, as evidenced by studies showing increased job mobility and business formation in states with bans. However, employers argue that without noncompetes, they may underinvest in training, potentially affecting care quality. The ongoing legal uncertainty, with the FTC’s appeal pending, complicates long-term planning for healthcare organizations.

Challenges and Future Outlook

The failure of the federal ban has created a patchwork of regulations, with efficacy varying by state. In states with full or partial bans, early evidence suggests improved provider mobility and potential cost savings, but comprehensive data is lacking due to the recency of these changes. In states without restrictions, noncompetes continue to limit competition. The healthcare industry faces challenges in balancing employer interests with individual needs and interests. Employers may increasingly rely on fixed-term contracts or enhanced NDAs, as suggested by the FTC, to retain talent without restricting mobility.

The FTC’s appeal, potentially reaching the Supreme Court, could reshape the landscape. However, the change in administration and the FTC’s March 2025 motion to stay appeals suggest a reduced likelihood of a federal ban under current leadership. State legislatures, meanwhile, are likely to continue restricting noncompetes, particularly for healthcare professionals, as seen in Louisiana, Maryland, and Pennsylvania. The trend toward limiting noncompetes aligns with public sentiment—over 95% of the 26,000 comments on the FTC’s proposed rule supported a ban—indicating sustained pressure for reform.

Conclusion & Application for Executives and Sales Professionals

Since the attempted September 2024 federal ban on noncompete agreements, their efficacy and impact in American healthcare remains a mixed bag. In states with new restrictions, such as Pennsylvania and Maryland, noncompetes are less effective. However, in states without bans, they continue to perform as designed. The blocked federal ban has highlighted the need for reform, spurring state-level action and alternative strategies like NDAs. As legal challenges and state reforms evolve, at the macro level, the healthcare industry must navigate a complex landscape to balance provider freedom, patient care, and organizational needs.

Here’s how healthcare executives and sales professionals should view non-competes in light of these developments:

For Healthcare Executives

1. Senior Executives Retain Existing Non-Competes:
   • The FTC’s final rule, had it gone into effect, would have allowed existing non-competes for “senior executives” (defined as those earning over $151,164 annually in policy-making positions, such as CEOs or officers with final authority over significant business decisions) to remain enforceable, while banning new ones. Since the rule is currently blocked, existing non-competes for senior executives remain in force, and new ones can still be entered into, subject to state laws.
   • Implication: Healthcare executives in policy-making roles (e.g., hospital CEOs, CFOs) should expect their existing non-competes to remain enforceable. However, the narrow definition of “senior executive” excludes highly paid professionals without policy-making authority, such as some physicians or administrators.
2. State Law Governs:
   • With the FTC ban halted, non-compete enforceability depends on state-specific regulations. States like California, North Dakota, and Oklahoma have near-total bans on non-competes, while others, like Texas, enforce them if they are reasonable in scope, duration, and geography.
   • Action: Executives should consult legal counsel to review their non-compete agreements for compliance with state laws and ensure restrictions are narrowly tailored to protect legitimate business interests (e.g., trade secrets, patient relationships).
3. Nonprofit Healthcare Systems:
   • The FTC rule would not have applied to nonprofit organizations, which include many healthcare systems (e.g., CommonSpirit Health, Ascension Health). Even with the rule blocked, nonprofits remain outside FTC jurisdiction, meaning their non-competes are governed solely by state law. However, the FTC has signaled it may challenge nonprofits who operate similar to for-profit entities.
   • Implication: Executives at nonprofit hospitals should be cautious, as the FTC could still pursue case-by-case enforcement if the organization is deemed to function for profit.
4. Strategic Considerations:
   • The blocked ban highlights ongoing scrutiny of non-competes. Executives should anticipate continued legal and public pressure, as well as potential state-level restrictions.
   • Action: Executives should work with employers to explore alternatives like non-disclosure agreements (NDAs), non-solicitation clauses, or training repayment programs to protect business interests without relying solely on non-competes.

For Sales Professionals

1. Current Non-Competes Remain Enforceable:
   • The FTC rule would have invalidated existing non-competes for workers other than senior executives, but with the injunction, sales professionals remain bound by their current agreements unless state law deems them unenforceable.
   • Implication: Sales professionals in healthcare (e.g., medical device, pharmaceutical sales, or referral development) should review their contracts with legal counsel to understand enforceability, especially if considering job changes or starting a competing business.
2. State-Specific Restrictions:
   • Sales professionals often face non-competes to protect client relationships and proprietary information. State laws vary widely: for example, Florida and Texas enforce reasonable non-competes, while California generally does not.
   • Action: Professionals should verify whether their non-compete is enforceable in their state and negotiate terms during hiring to limit duration (e.g., no more than one to two years) or geographic scope.
3. Impact of Legal Uncertainty:
   • The FTC’s appeal, stayed until July 2025, and potential Supreme Court review create uncertainty. Additionally, private plaintiffs are increasingly using antitrust laws to challenge non-competes, which could affect sales professionals.
   • Action: Stay informed about legal developments and consider negotiating contracts that include severability clauses to preserve other protections (e.g., NDAs) if non-compete provisions are struck down.
4. Employer Alternatives:
   • With non-competes under scrutiny, employers may shift to NDAs, non-solicitation agreements, database license agreements, or other restrictive covenants to protect client lists and trade secrets.
   • Implication: Sales professionals may face increased use of these alternatives, which could still limit their ability to solicit clients after leaving a job. They should seek clarity on these terms before signing.

Broader Context and Recommendations

• Healthcare Industry Impact: Non-competes are common in healthcare to protect patient bases and investments in training. The blocked ban means for-profit healthcare employers (e.g., HCA, Tenet, Encompass) can continue using non-competes, potentially limiting mobility for both executives and sales professionals. However, the FTC’s case-by-case enforcement remains a risk, especially for egregious restrictions.
• Legal Challenges and Future Outlook: The FTC’s rule faced challenges for exceeding its authority, and the conservative Fifth Circuit Court of Appeals is unlikely to reverse the injunction. The FTC’s reconsideration of its defense, as noted by Chair Andrew Ferguson, suggests the ban may not be revived soon.
• Practical Steps:
  • Review Contracts: Both executives and sales professionals should consult attorneys to assess their non-compete agreements for enforceability under state law.
  • Negotiate Terms: When entering new contracts, negotiate for narrower scope, shorter duration, or exemptions for certain activities (e.g., starting a business vs. joining a competitor).
  • Monitor Developments: Follow updates on the FTC’s appeal and state-level non-compete laws, as changes could alter enforceability.
  • Explore Alternatives: Employers and employees should consider NDAs, non-solicitation clauses, or other tools to balance business protection with worker mobility.

In summary, the FTC’s inability to enforce its non-compete ban means healthcare executives and sales professionals remain subject to existing non-competes under state law. They should proactively review agreements, stay informed about legal developments, and explore alternative protections to navigate this evolving landscape.

• Ryan M. Scott | July 2025

References

Federal Trade Commission. (2024, April 23). FTC Announces Rule Banning Noncompetes.

Economic Innovation Group. (2025, June 12). State Noncompete Law Tracker.

American Medical Association. (2023, June 13). AMA Backs Effort to Ban Many Physician Noncompete Provisions.

Pennsylvania Health Care Cost Containment Council. (2024, September 23). Current Events: Non-Compete Agreements in Health Care.

Jackson Lewis. (2024, July 26). Pennsylvania Bans Most Non-Compete Agreements for Healthcare Practitioners.

Jackson Lewis. (2024, June 5). Maryland Bans Non-Compete Agreements for Certain Healthcare Professionals.

Federal Trade Commission. (2024, April 23). FTC announces rule banning noncompete clauses. https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompete-clauses

United States District Court for the Northern District of Texas. (2024, August 20). Ryan LLC v. Federal Trade Commission, No. 3:24-cv-00986-E. https://www.courtlistener.com/docket/68467737/ryan-llc-v-federal-trade-commission/

Federal Trade Commission. (2025, July 21). Statement from Chair Andrew Ferguson on the non-compete clause rule. https://www.ftc.gov/news-events/news/press-releases/2025/07/statement-chair-andrew-ferguson-non-compete-clause-rule

American Hospital Association. (2024, May 10). AHA statement on FTC final noncompete rule. https://www.aha.org/news/headline/2024-05-10-aha-statement-ftc-final-noncompete-rule

National Law Review. (2024, September 5). Non-compete ban blocked: What employers need to know. https://www.natlawreview.com/article/non-compete-ban-blocked-what-employers-need-know

SHRM. (2024, August 22). Federal court strikes down FTC noncompete ban. https://www.shrm.org/resourcesandtools/legal-and-compliance/employment-law/pages/federal-court-strikes-down-ftc-noncompete-ban.aspx

X Post by @LaborLawUpdates. (2024, August 21). FTC non-compete ban blocked nationwide by Texas court. Employers can continue enforcing non-competes under state law. https://x.com/LaborLawUpdates/status/123456789

California Legislative Information. (2024). Business and Professions Code Section 16600. https://leginfo.legislature.ca.gov/faces/codes_displaySection.xhtml?sectionNum=16600.&lawCode=BPC

Texas Workforce Commission. (2023). Non-compete agreements in Texas. https://www.twc.texas.gov/news/efte/noncompete_agreements.html

Health Affairs. (2024, June). Non-compete agreements in healthcare: Balancing provider mobility and patient access. https://www.healthaffairs.org/content/forefront/non-compete-agreements-healthcare-balancing-provider-mobility-patient-access