The FTC Noncompete Rule Is Vacated. State Law Is the Story Now.

On August 20, 2024, US District Judge Ada Brown granted summary judgment to the plaintiffs in Ryan LLC v. FTC, vacating the Federal Trade Commission noncompete ban before its September 4 effective date. For Ambulatory Surgery Centers, the immediate operational question is settled for now: existing physician noncompetes remain governed by state law, which is to say, by a highly variable patchwork. The strategic question is what to do before the next round.

How we got here

On April 23, 2024, the FTC voted 3-2 to issue a final rule banning most noncompete clauses for for-profit workers. The rule would have applied to most employed physicians, with a narrow exception for existing senior executive noncompetes. Three lawsuits followed within a week. The Northern District of Texas ruling consolidated the challenge and found that the FTC lacks substantive rulemaking authority under Section 6(g) of the FTC Act and, separately, that the rule was arbitrary and capricious in its scope.

The FTC has indicated it may appeal to the Fifth Circuit. The litigation timeline likely runs into 2025. In the interim, the rule has no force.

The state-by-state reality

State law on physician noncompetes is genuinely variable. A handful of representative examples:

• California has banned employee noncompetes for decades and tightened the prohibition further in 2024
• Minnesota banned new employee noncompete agreements entered into on or after July 1, 2023
• Oklahoma generally prohibits noncompetes by statute, with limited carve-outs
• Indiana, Tennessee, and Texas permit physician noncompetes subject to specific statutory requirements regarding patient notification, buyout provisions, and reasonable scope
• Many states have no physician-specific statute and rely on common-law reasonableness review, which produces uneven outcomes

For multi-state ASC groups, the practical effect is that the same employment template produces different enforceability outcomes depending on the location of the surgery center. The same is true for retention provisions, garden-leave clauses, and patient nonsolicitation language.

What ASCs should do this quarter

1. Centralize physician employment contracts. A surprising number of ASCs cannot produce, on a single afternoon, the executed employment agreement for every physician currently on staff. Fix that first. Without the artifact, every other step is theoretical.
2. Document renewal cycles. Map each physician contract to its term, automatic renewal language, and notice-of-nonrenewal deadline. Tie those dates to the credentialing reappointment cycle where possible, so contract review and privileging review surface together.
3. Track state-by-state exposure. For each contracted physician, record the state of practice, the noncompete language in effect, and the controlling state law. The matrix is what you reach for when a physician departs or when state law changes.
4. Watch the state legislative calendar. Multiple states have active bills restricting physician noncompetes. Pennsylvania enacted restrictions in mid-2024. New York and others have proposals pending. Subscribe your contract function to the relevant state medical society alerts so changes do not surprise you mid-contract.
5. Reassess buyout provisions and liquidated damages. In states that permit noncompetes subject to a buyout, the dollar amount is often stale. A buyout set in 2018 may not reflect current market realities, and an unreasonable amount is itself a basis for invalidation.

The structural takeaway

The FTC rule attempted to substitute a single federal standard for 50 state regimes. The court ruling preserves the patchwork. ASCs that operate across state lines, or that recruit from across state lines, will continue to absorb the cost of that variance. The centers that handle it best are not the ones with the best contract language; they are the ones who can produce, on demand, the contract, the controlling law, the renewal calendar, and the credentialing status, side by side and current. That is an infrastructure problem, not a legal one.

How DocForms helps

Contract Management stores executed physician agreements, tracks renewal and notice-of-nonrenewal dates, and maintains the version history that proves what was signed and when amendments took effect.

Credentialing and Privileging aligns the reappointment cycle with the contract calendar, so the conversation about renewal happens in time to act on it rather than after the auto-renewal has triggered.

Staff Records ties each physician to their state of practice, controlling employment terms, and credentialing status, producing the state-by-state matrix that the current legal environment requires.