Texas Court Revives Viability of Healthcare Non-Competes

On August 20, 2024, the United States District Court for the Northern District of Texas blocked the Federal Trade Commission's ("FTC") rule that would have banned most existing non-compete agreements and prohibited new ones, except in limited circumstances. Please see the Dinsmore & Shohl LLP legal alert issued Wednesday here. This rule, known as the “Final Rule,” was scheduled to take effect on September 4, 2024.

As we first reported in late April, the development in early July and later the decision in Pennsylvania, healthcare providers, primarily those that are for profit, would have been subject to the Final Rule, which would have presented a major change to healthcare industry hiring efforts, investment in personnel, hospital-provider alignment and transactional analysis. With respect to non-profit healthcare providers, the FTC had indicated its intent to exert its jurisdiction to the maximum extent possible by evaluating non-profits for compliance with standards governing non-profit entities.

For healthcare providers that use non-compete agreements, the Ryan decision is a welcome reprieve from the fast-approaching September 4 deadline.  As a result of the Ryan decision, healthcare providers are not required to make changes to their employment agreements to eliminate non-compete provisions and no longer need to explore other contractual countermeasures that may have been less protective than non-compete agreements.  In addition, healthcare providers are not required to send notices to employees and former employees who have non-compete agreements in effect.

Dinsmore will continue to notify you of developments as they become available. In the meantime, if you have any questions about the Final Rule or need strategic advice and counsel, do not hesitate to contact your Dinsmore attorney.