A federal judge's ruling could put noncompete ban on hold
A federal judge is expected to rule soon on whether to allow the Federal Trade Commission's ban on noncompete clauses to take effect in September. The decision could affect some 30 million people.
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A Texas judge has struck down a nationwide ban on noncompetes. Those are employment agreements that prevent workers from going to work for a competing company or launching one of their own. The government is likely to appeal, and the case could end up before the Supreme Court. NPR's Andrea Hsu talked to two people with differing hopes about how this legal fight will end.
ANDREA HSU, BYLINE: Let's first go to James Applegate. He's a family physician with the Boyne Area Free Clinic in rural northern Michigan, where anyone can get health care for free. He rejoiced when the Federal Trade Commission narrowly approved the noncompete ban back in April.
JAMES APPLEGATE: I was ecstatic because it's just so wrong for patients.
HSU: He says noncompetes hurt patients by driving doctors away. This is a problem that doctors all over the country wrote about in comments to the FTC. Noncompetes typically prevent doctors from taking another job within a certain radius, as much as 50 miles, if they quit. So if a doctor has a problem with their employer and wants a new job, they must leave the area altogether.
APPLEGATE: They leave their patients. They have to leave the community. It's just so morally wrong.
HSU: Applegate's patients are mostly low-wage workers from the area's hotels and restaurants and ski resorts who are uninsured or underinsured.
APPLEGATE: If you have no insurance at all, we'll see you. If you have huge copays, we'll see you.
HSU: Applegate relies on others in the area, cardiologists, orthopedists, to see patients who have more complicated medical needs. He used to refer them to specialists who would see them on the side and not charge them, even if their noncompetes didn't allow that. But many of them have moved on, and Applegate says new or younger doctors...
APPLEGATE: They follow the rules.
HSU: They don't want their employer to take them to court. These days, he struggles to find specialists for his patients. And if his patients can't access specialty care...
APPLEGATE: They end up floundering. They end up with doing the best that I can do for them until they wind up in the emergency room and then they get a huge bill.
HSU: So if the noncompete ban is ultimately overturned?
SARAH RUIZ: I would be very disappointed.
HSU: A thousand miles south, Sarah Ruiz has a different view of things. She's the owner of Sweet Tea Yoga, which she opened in Peachtree City, Ga., in 2018. She had recently moved there and discovered there was no dedicated yoga studio in the golf cart community of about 40,000 people.
RUIZ: My husband and I were like, hey, this is a great opportunity.
HSU: She says, at first, she never thought of making her teachers sign noncompetes. She knows yoga teachers typically have to piece together work to make a living. But in 2021, one of her teachers opened a brand-new studio 3 miles away, taking half of Sweet Tea's unlimited monthly members - the regulars.
RUIZ: I got burned and it hurt. So after that, I then created a noncompete.
HSU: Now, she still allows her teachers to teach elsewhere, anywhere. Some teach at a nearby wellness center. Others teach online from their homes. But her noncompete restricts them from opening a new studio within a 5-mile radius for two years. She says not a single teacher refused to sign it.
RUIZ: Most of them were supportive.
HSU: They, too, lost income when half the regulars left. Ruiz says together, they climbed out of that hole, but it took time.
RUIZ: It took a full year, if not year and a half, before we got back to where we were.
HSU: She's worried about what will happen if she's no longer allowed to include noncompetes in her teacher contracts.
RUIZ: Without protection, my business is in danger.
HSU: The rule does have a few carve-outs, including for senior executives, but not for small business owners like Sarah Ruiz. So if and when the noncompete ban takes effect, she says she'll have to have a conversation with her teachers and hope for the best.
Andrea Hsu, NPR News.
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CHANG: The government says it is, quote, "seriously considering" an appeal of the court's decision striking down the noncompete ban.
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