In a landmark legal decision, a federal judge has struck down the Federal Trade Commission’s (FTC) attempt to impose a near-total ban on noncompete agreements. This decision has far-reaching consequences, potentially reshaping business practices and employment laws across industries in the United States. While the ruling may have profound implications for large corporate structures and investor-backed organizations, its impact on the autism therapy industry remains a subject of debate. Experts are divided on how significantly this legal challenge will affect the sector, but there are clear indications that the autism therapy space will not be immune to the shifting tides of corporate regulation.
What Happened?
In April of 2023, the FTC’s board of commissioners approved a rule that would effectively ban noncompete agreements in most cases, with only limited exceptions. The rule aimed to increase worker mobility by preventing employers from requiring employees to sign restrictive covenants that prevent them from joining competitors or starting their own businesses for a set period after leaving a job. According to the FTC, noncompete clauses suppress innovation and hinder fair competition by preventing employees from moving freely between companies.
However, the rule was met with significant opposition from both business groups and legal advocates. Immediately following the FTC’s announcement, several organizations, including the U.S. Chamber of Commerce and Ryan LLC, filed a lawsuit against the rule, challenging the legality and scope of the proposed ban. The litigation was fast-tracked, and on August 20, 2023, Judge Ada Brown of the U.S. District Court for the Northern District of Texas ruled in favor of the plaintiffs, stating that the FTC had overstepped its statutory authority in implementing such a broad rule. She described the rule as “arbitrary and capricious,” and granted the challengers’ motion to have the rule set aside.
Judge Brown’s decision was based on her finding that while the FTC does have some authority to regulate unfair methods of competition, it lacked the legal power to create substantive rules altering the structure of employment contracts across industries. She further explained that the Federal Trade Commission Act, which empowers the FTC, was intended to address only certain procedural matters and did not grant the agency the authority to institute wide-reaching changes to business practices.
The ruling came after an earlier decision in July, where Judge Brown had granted a partial injunction to delay the implementation of the rule. In her July ruling, she acknowledged that while the FTC could regulate methods of unfair competition, the specific rule banning noncompetes overstepped the agency’s legal authority.
The U.S. Chamber of Commerce celebrated the ruling as a victory against what they view as government overreach in business decision-making. The FTC, however, has signaled that it is considering an appeal, suggesting that this legal battle is far from over.
Why Is This Relevant for the Autism Therapy Industry?
The FTC’s proposed ban on noncompetes would have had a significant impact on industries across the United States, but the FTC noncompete ban autism therapy space presents a unique context. The rise of private equity investment in autism therapy companies has introduced many corporate structures, including the use of noncompete agreements, to the sector. Over the past decade, the autism therapy industry has experienced substantial growth, particularly through mergers and acquisitions, where private equity firms have sought to build large platform companies in the space. This has led to the formation of significant corporate teams and the introduction of more traditional business practices, such as noncompete clauses, into employment contracts for executives, managers, and some clinical staff.
The FTC noncompete ban autism therapy industry has always been somewhat distinct from other healthcare sectors in that it involves both clinical care for individuals with autism and a robust business model. As a result, the application of noncompete agreements in the field has varied widely. While many companies in the autism therapy space do not enforce noncompete agreements with their clinical staff, such as Registered Behavior Technicians (RBTs) or Board Certified Behavior Analysts (BCBAs), noncompetes have been more commonly applied to executives, high-level management, and employees in investor-backed firms.
Darren Patz, partner in the government affairs and public policy practice at DLA Piper LLP, pointed out that noncompetes in the FTC noncompete ban autism therapy sector would primarily have impacted those in executive or investor roles. He noted that most autism therapy providers do not typically require noncompete clauses for RBTs or BCBAs, who form the majority of the clinical workforce in the sector. Instead, Patz argued that the real concern among private equity firms and corporate executives would be around restrictive covenants following mergers and acquisitions, where such clauses might be crucial for protecting investments and limiting competition in the short term.
Despite the relatively limited scope of noncompetes in the clinical segment, their impact is still notable. Research cited by the FTC indicated that around 33% of BCBA contracts contained noncompetes in 2020, and follow-up studies in 2023 found that 38% of BCBAs had worked in roles where noncompetes were relevant. Additionally, a significant portion of BCBAs, about 57%, reported being forced to relocate to another region due to noncompete agreements, and 44% took pay cuts as a result of being bound by such clauses. These statistics suggest that noncompetes have a more substantial impact on clinical workers than might have been assumed, and that the proposed FTC noncompete ban autism therapy could have directly benefited a portion of the workforce in autism therapy.
Still, experts like Daniel Unumb, president of the Autism Legal Resource Center LLC, argue that noncompetes have not been widely enforced in the Applied Behavior Analysis (ABA) field. Unumb pointed out that the primary concern for many autism therapy providers has been access to healthcare services, rather than competition between firms. As such, providers have relied more heavily on other retention mechanisms, such as employee benefits, career development opportunities, and financial incentives, to keep staff loyal rather than relying on restrictive agreements like noncompetes.
What Does This Mean for the Future?
While the FTC noncompete ban autism therapy attempt has been blocked, it is clear that the legal battle is far from over. Even if the current ruling holds, the push for legislative or regulatory action to limit the use of noncompetes is likely to continue. Public sentiment in the United States has shifted toward greater skepticism of large corporations, with a recent Pew Research Center poll indicating that only 25% of Americans—across both Democratic and Republican parties—believe large corporations have a positive impact on the country. This growing sense of anti-corporate sentiment could fuel future legislative efforts to curtail noncompetes and other restrictive employment practices in various sectors, including autism therapy.
Furthermore, even if the FTC noncompete ban autism therapy rule is ultimately reinstated or amended, changes in legal doctrines, such as the Supreme Court’s recent elimination of the Chevron doctrine, could make it easier for challengers to contest federal regulations and rule changes. This means that the legal landscape surrounding noncompetes may remain in flux for some time.
Darren Patz emphasized that despite the setbacks, the FTC will likely continue to push for its objectives. “When the government sets out to accomplish something, they generally find a way to move forward,” he stated, signaling that the effort to curtail noncompetes and promote worker mobility could continue in other forms.
Conclusion
The recent legal ruling blocking the FTC noncompete ban autism therapy proposed near-total ban on noncompete agreements marks a significant moment in the ongoing debate over labor mobility, business practices, and corporate regulation in the United States. While this ruling is a win for businesses who view noncompetes as critical for protecting their investments and trade secrets, it is far from the final word on the issue. For the autism therapy industry, where the use of noncompetes is mixed and their impact on clinical staff is significant, this ruling could have important consequences. However, even if the ban remains blocked, ongoing debates, evolving public opinion, and potential legislative changes may ensure that the conversation about noncompetes and restrictive employment practices continues in the years ahead.
As the situation develops, autism therapy companies and their employees will need to stay alert to the evolving regulatory landscape and prepare for potential changes that could reshape the way businesses structure their employment contracts and retain talent in the future.
