FTC Proposes Rule to Ban Noncompetition Clauses in Employer Agreements
Thursday, February 2, 2023
By George F. Indest III, J.D., M.P.A., LL.M., Board Certified by The Florida Bar in Health Law
In a precedent setting move, on January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule that would ban noncompetition clauses in employment agreements as an unfair method of competition. According to the FTC, noncompetition agreements (also referred to as restrictive covenants, covenants-not-to-compete, and noncompetes), are widely used, especially in the health care industry, and suppress wages and harm competition in U.S. labor markets.
By stopping the use of this type of agreement, the FTC estimates that the proposed rule could increase wages by nearly $300 billion annually and expand career opportunities for about 30 million Americans. It would certainly make a lot of physicians, dentists, and nurse practitioners in Florida happy.
Click here to view the FTC's noncompete factsheet.
The Key Takeaways.
The FTC’s proposed new rule would generally prohibit employers from using restrictive covenants. Specifically, it would make it illegal for an employer to:
1. Enter into or attempt to enter into a noncompetition agreement with a worker;
2. Maintain a noncompetition agreement with a worker; or
3. Represent to a worker that the worker was subject to a noncompetition agreement.
Additionally, the proposed rule would apply to independent contractors and anyone else who works for an employer, whether paid or unpaid. It would also require employers to rescind existing noncompetition agreements and actively inform workers that they are no longer in effect.
The new rule would generally not apply to other types of employment restrictions, like nondisclosure agreements or nonsolicitation agreements. However, different types of employment restrictions could be subject to the rule if they are so broad in scope that they function the same as restrictive covenants.
The agency will accept comments on the proposed rule for 60 days after its publication in the Federal Register. View the proposed new rule here.
To learn more about noncompetition agreements in the healthcare industry, click here to read one of our prior blogs.
Contact a Health Care Attorney Experienced in Negotiating and Evaluating Physician and Health Professional’s Complex Business Litigation, Transactions.
At the Health Law Firm we provide legal services for all health care providers and professionals. This includes physicians, nurses, dentists, physician assistants, nurse practitioners, psychologists, psychiatrists, mental health counselors, durable medical equipment suppliers (DME), medical students and interns, hospitals, ambulatory surgical centers, pain management clinics, nursing homes, and any other health care provider.
The services we provide include reviewing and negotiating contracts, preparing contracts, helping employers and employees enforce contracts, litigation and defense of enforcement of restrictive covenants, (covenants not to compete), complex business and health litigation, and administrative hearings, advice on setting aside or voiding contracts, litigation of contracts (in state or federal court), business transactions, professional license defense, opinion letters, representation in investigations, fair hearing defense, representation in peer review and clinical privileges hearings, Medicare and Medicaid audits.
To contact The Health Law Firm, please call (407) 331-6620 or toll-free (888) 331-6620 and visit our website at www.TheHealthLawFirm.com.
Health Law Weekly. "FTC Proposes Ban on Worker Noncompete Clauses." American Health Lawyers Association. (AHLA). (January 6, 2023). Web.
"FTC proposes to ban noncompete clauses in employer agreements." American Hospital Association (AHA). (January 5, 2023). Web.
Kaplan, Peter. "FTC Proposes Rule to Ban Noncompete Clauses, Which Hurt Workers and Harm Competition." Federal Trade Commission (FTC). (January 5, 2023). Web.
About the Author: George F. Indest III, J.D., M.P.A., LL.M., is Board Certified by The Florida Bar in Health Law. He is the President and Managing Partner of The Health Law Firm, which has a national practice. Its main office is in the Orlando, Florida, area. www.TheHealthLawFirm.com The Health Law Firm, 1101 Douglas Ave. Suite 1000, Altamonte Springs, FL 32714, Phone: (407) 331-6620 or Toll-Free: (888) 331-6620.
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