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HEALTH POLICY NEWS: Federal Trade Commission Bans Noncompete Agreements; Legal Challenges Likely

Last week, the Federal Trade Commission (FTC) adopted a comprehensive ban on noncompete clauses in employment contracts with no exceptions for the healthcare industry. The final rule will take effect 120 days after publication in the Federal Register, but legal challenges are likely to stall implementation of all or part of the regulations. 
The FTC estimates that banning noncompete agreements will reduce spending on physician services by as much as $194 billion over the next decade.

The rule applies to all workers, with a limited exception for existing noncompete agreements with senior executives in “policy making" positions whose total annual compensation is at least $151,164. Despite objections from hospitals, the rule could implicate hospital and other healthcare entities that claim nonprofit tax-exempt status. While the FTC does not have the authority to apply the ban to nonprofits, the final rule makes clear that not all entities claiming tax-exempt status as nonprofits fall outside the Commission's jurisdiction.

Once the rule takes effect, employers will be required to notify workers that their existing noncompete agreements are no longer enforceable. 

ASNC is following this issue as it develops and will keep members informed. 

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