Is the FTC Banning Non-Competes?

Is the FTC Banning Non-Competes?
Is the FTC Banning Non-Competes?

Earlier this month, the Federal Trade Commission (FTC) proposed a rule that will ban many non-compete agreements throughout the country if it is enacted.

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Non-compete agreements are agreements that prevent employees from working in certain industries following employment with their current employer. They are often limited by geographical scope and time.

For example, a non-compete clause may prevent a physician from working in the medical field for one year following employment within 25 miles of the employer. States currently have different laws and approaches to dealing with non-compete covenants.

The FTC estimates that one in five workers are subject to a non-compete agreement.

The proposed rule would make it illegal for an employer to:

  • enter into a noncompete,
  • maintain a non-compete, or
  • represent that an employee is subject to a non-compete agreement.

Existing non-compete provisions would be required to be rescinded.

The rule would also apply to independent contractors, not just employees.

The proposed rule does not directly address non-solicitation clauses and non-disclosure agreements, but states that any form of agreement that prohibits workers from seeking or accepting new employment is prohibited.

If enacted, the FTC rule will greatly impact employment policies and contracts nationwide.

In healthcare law, we have seen an increase in non-compete clauses over the past few years. Most employers expect healthcare employees to agree to some form of non-competition. If enacted, this change could greatly impact healthcare employers.

The comment period is open through March 10, 2023.

If enacted, we expect to see legislation from employers fighting the rule. It will likely not be as broad as it is currently written, if it is enacted.

If you have questions or need help with your healthcare contract or your non-compete clause, contact Rickard & Associates today.

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