In August, the FTC's ban on noncompete agreements was struck down by a Texas federal judge.
U.S. District Judge Ada Brown ruled the FTC could not use its power to completely ban noncompetes. The decision immediately sparked controversy. Some ASC leaders and other healthcare providers saw the ban as making it easier for physicians to leave hospital employment and enter private practice. Others are wary that a total ban on noncompetes could have a negative impact on ASCs and physician owners.
However, in an Oct. 14 blog post, employment and labor-focused law firm Jackson Lewis said that despite the recent ruling, the controversy surrounding the non-compete ban may not be over just yet.
While two other pending non-compete cases are still pending in lower courts and "unlikely" to affect the status of the August ruling, "the FTC's authority to identify anti-competitive activity and pursue enforcement mechanisms case-by-case remains unchallenged and intact," writes Jackson Lewis attorneys Clifford Atlas, Erik Winton, Mary Smith and Caterina Catalano in the post.
According to the post, the language of the FTC's now "set aside" final rule is "key" in understanding the FTC's enforcement method for non-competes. The authors contend that the FTC characterizes non-compete agreements to be "unfair methods of competition" and therefore in violation of Section 5 of the Federal Trade Commission Act. This act bans "unfair methods of competition" and "unfair or deceptive acts or practices."
The blog post further describes the enforcement power of the FTC by offering an example in which a firm exercising a noncompete may still see strict enforcement by the commission under the FTCA. Under this law, the FTC still has a number of ways to target employers using non-competes the commission deems unfair or anticompetitive to employees.
The blog also notes that the FTC and Department of Justice together have the power to prosecute unlawful non-competes under the Sherman Antitrust Act, which "makes conspiracies to restrain trade felonies subject to significant penalties, including fines up to $100 million or up to 10 years in prison."
While the FTC and DOJ have not utilized the Sherman Antitrust Act to target non-compete agreements directly, they have pursued a number of criminal actions against employers who entered "no-poach" or wage-fixing agreements with one another. The DOJ also recently filed a Statement of Interest in a civil class action case challenging the use of non-compete agreements as anti-competitive monopolization.
This, the authors say, could be a preview of FTC strategies for targeting noncompetes.
"We expect that the FTC will begin testing the waters by opening investigations and enforcement proceedings and filing Statements of Interest in certain industries, with respect to non-compete agreements it believes are anti-competitive," the authors write. "The FTC will consider the industry, level of the employee, company size, and scope and reasonableness of the non-compete in effectuating case-by-case enforcement."