A federal judge's ruling could put noncompete ban on hold

Transcript

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A nationwide ban on noncompetes is set to take effect September 4. Those are agreements that prevent employees from going to work for a competing company or launching one of their own. But legal challenges to the nationwide ban are making their way through the courts. And this week a ruling from a federal judge in Texas could put the ban on hold. 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 newer, 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...

APPLEGATE: 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.

SARAH 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 three 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 five-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 a year and a half before we got back to where we were.

HSU: Now 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. Transcript provided by NPR, Copyright NPR.