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R EVIEW

Restrictive Covenants in Medicine in the United States

physicians adversely affected by RCs. After incorporation of suggestions from the public, the fi nal rule broadly and fi rmly stated that noncompetes are in violation of Section 5 of the FTC Act. Remedies for employers were limited in focus on trade secret protections and use of nondisclosure agreements. With this decision from the FTC initially set in practice, the matter of whether the FTC has the scope to mandate such a wide sweeping legal policy was brought to ques tion. Anticipating opposition, the FTC included a section in the ruling providing a defense of their agency ’ sauthor ity. The document emphasized that the FTC was granted by Congress and “ expressly empowered and directed ” to prevent unfair methods of competition throughout the economy — across industries. Case history dating back to 1914 was cited, and this legislative history coupled with the powers given by Congress were the cornerstone of theFTC ’ s arguments for the legality of the ban. The ruling, although not speci fi c for noncompete clauses for doc tors, mentions the term “ physician ” 156 times, with sev eral pages devoted to relevant issues outlined in this manuscript. The FTC ruling discusses patient harms and physician burnout and provides direct case studies on these harms. U NSETTLED L EGAL I SSUES It is likely that beyond the substance of the FTC ban, the very authority of the agency to remove RCs will continue to be challenged across states and poten tially require judgment by the U.S. Supreme Court. It is helpful to mention the “ Chevron deference ” as it directly relates to this issue. The Chevron deference standard refers to the precedent set in 1984 in a case that was heard at the level of the U.S. Supreme Court between Chevron U.S.A., Inc., v. Natural Resources Defense Council, Inc., regarding speci fi c statutes within the Clean Air Act of 1977. In essence, the Court ruled in favor of the Natural Resources Defense Council. As a result, the Chevron judgment established a framework to allow courts, at all levels, to consider the intent of Congress when passing regulations and defer to federal agencies. These agencies, by design, are often made up of subject matter experts in their re spective fi elds and are also generally in appropriate positions to make judgements in the interpretation of these laws for the public. Fundamentally, federal agen cies were given broader authority to interpret and make rules consistent with the original intent. This doc trine affected regulations in numerous areas, including environmental law, health care, commerce, and im migration policy. On 28 June 2024, the U.S. Supreme Court overturned the Chevron deference doctrine on the basis of the cases of Loper Bright Enterprises v. Raimondo and Relentless, Inc., v. Department of Commerce , both of which centered on the authority of the National Marine Fisheries Service to regulate commercial fi shing practices (21).

Without the Chevron deference, the FTC ’ s ruling on RCs may be vigorously challenged by various stake holders in the current legal environment. These organi zations include the American Hospital Association and the U.S. Chamber of Commerce, among others. Most recently, various business organizations supported by the U.S. Chamber of Commerce fi led motions to stay the FTC ruling in the U.S. District Court in Texas (22). On 20 August 2024, U.S. District Judge Ada Brown held that the FTC lacked the authority to enact the rule, essentially blocking national enforcement of the origi nal ban. The lawsuit was initiated by Ryan, LLC, a large global tax consulting and service provider. In response to the Ryan ruling, the American Hospital Association sent an extensive letter to the FTC supporting the Texas ruling and highlighting arguments in favor of noncompete clauses for health care workers (14). The key arguments covered broad areas including scope of power of the FTC, effect of invalidation of preexisting versus future contracts, vagaries of application to non pro fi t versus for-pro fi t hospitals, and potential economic harms on hospital systems. Countering the responses from these organizations has been comments submitted to the FTC from individual health care workers from politically diverse states as well as physician and nursing societies, which have been overwhelmingly in favor of the ban (23, 24). C ONCLUSION The arguments in favor of limiting or eliminating RCs for physicians are grounded in real-world exam ples with tangible effects on physician well-being and patient care. Legal cases fi ghting the ban will likely continue to originate from several sources, including at the state level from employers and from lobbying groups representing interests of large health care sys tems. Given the Texas federal court ruling, the national ban is currently not in effect. The fi nal rule of the FTC may make its way to the U.S. Supreme Court in the near future where if the case is heard, a conservative court may not support the FTC based on recent prece dent. For practicing physicians, RCs seem to remain a state-by-state matter and they should factor into deci sions on type of employment (for pro fi t or not), contract negotiations, and potentially geographic location in which to live and practice. If the FTC ultimately cannot regulate RCs, physicians may have little recourse to combat noncompete clauses. Lobbying for application of antitrust laws to health care oligopsonies and use of physician unions to direct collective bargaining and protection may be paths forward. From Department of Medicine, Division of Cardiology, University of Texas Health Science Center, San Antonio, Texas (A.P.); University of the Incarnate Word – School of Medicine, San Antonio, Texas (R.G.); and Farrimond Castillo & Bresnahan, San Antonio, Texas (R.B.).

Annals of Internal Medicine • Vol. 178 No. 1 • January 2025 73

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