A Texas judge struck down the FTC’s noncompete bans. Here is what that means for doctors.

Health systems in the competitive Philadelphia-area market can continue banning doctors and other clinicians from going to work for competitors after a federal judge in Texas struck down this week a Federal Trade Commission rule from April that banned such employment contracts. These noncompete agreements impact one in five American workers, including many health-care workers employed by hospitals, nursing homes, and home-care agencies.

Up to 45% of physicians are bound by noncompete agreements, according to the American Medical Association. These clauses often include a distance in which doctors cannot take new jobs for a number of years. In the Philadelphia area, where multiple hospitals compete within a small geography, such prohibitions could require physicians to leave the region to change jobs.

» READ MORE: The FTC banned non-compete agreements. Experts say Philly doctors should wait to shred their contracts.

So when the FTC announced the ban, which was set to go into effect in September, many physicians cheered. But experts advised that the FTC’s rule was unlikely to go into effect without a legal challenge.

On Tuesday, Judge Ada Brown of the Northern District of Texas ruled that the FTC didn’t have the proper authority to ban noncompetes. Brown also found the rule to be a “one-size-fits-all approach with no end date,” making it overly broad.

“We are disappointed by Judge Brown’s decision and will keep fighting to stop noncompetes that restrict the economic liberty of hardworking Americans, hamper economic growth, limit innovation, and depress wages,” FTC spokesperson Victoria Graham said in a statement.

Here is what Philadelphia area-physicians and health-care workers need to know about the ruling and the future of the FTC’s noncompete ban.

An agreement that bars workers from taking a new job in a certain geographic area, professional field, or with specific competitors for a period of time.

A typical noncompete clause for physicians includes a geographic distance — such as radius from a hospital — and restricts them from accepting a job within it for a certain time period.

Noncompete agreements are a method of unfair competition, the FTC ruled in April.

If the rule went into effect, it would have generally banned employers from signing new noncompetes with workers.

The rule would have also voided most existing noncompete provisions, except for senior executives. The FTC said that only 1% of workers fall into that category.

Some doctors in private practice and nonprofits could have been exempt from the rule on a case-by-case basis.

The U.S. Chamber of Commerce and other groups representing businesses and employers sued the FTC in an effort to prevent the noncompete ban from taking effect.

Tuesday’s opinion is in response to a lawsuit filed by Ryan LLC, a Dallas-based tax services firm.

The American Hospital Association, an industry group, filed a court brief in support of Ryan. It argued that physicians are “fundamentally different from other workers” and recommended that the FTC exempt high-skilled workers from its rule.

Judge Brown struck down the noncompete ban nationwide, saying that the FTC exceeded its authority when it issued the rule.

“The role of an administrative agency is to do as told by Congress, not to do what the agency thinks it should do,” Brown wrote in the opinion.

Brown cited in her opinion a recent U.S. Supreme Court ruling that curtailed an administrative agency’s ability to issue rules without explicit authority from Congress.

In addition, Brown called the rule “arbitrary and capricious,” stating that it is overly broad and doesn’t rely on proper evidence. The FTC cited studies on the impacts of state laws regulating noncompetes, but the court noted that no state has a ban as sweeping as the FTC’s proposal, so the evidence amounted to an apples-to-oranges comparison.

The FTC also didn’t explain why it imposed a near-total prohibition, instead of “targeting specific, harmful non-competes,” Brown wrote.

The FTC rule will not go into effect unless a higher court reverses Brown’s decision.

“We are seriously considering a potential appeal,” Graham, the FTC spokesperson, said in a statement.

The path to reverse the ruling won’t be easy for the FTC, said Larry Pockers, a partner at Duane Morris, a Philadelphia-based law firm. Brown’s ruling is well-reasoned, Pockers said, and could resonate with the conservative-leaning courts that would review an appeal — the Fifth Circuit Court and, later, the U.S. Supreme Court.

Without a change to the Supreme Court’s composition, he said it’s hard to see the agency finding a sympathetic ear to its sweeping rule.

“The FTC ban is likely dead on arrival to the U.S. Supreme Court,” Pockers said.