On January 5, 2023, the Federal Commerce Fee (“FTC”) proposed an all-encompassing new rule to bar employers from together with non-compete clauses in contracts with their staff. See under for the solutions to 5 essential questions on how this proposed rule impacts non-competes within the well being care business.
- What does the proposed rule prohibit? The proposed rule decrees it “an unfair methodology of competitors for an employer to  enter into or try and enter right into a non-compete clause with a employee;  keep with a employee a non-compete clause; or  characterize to a employee that the employee is topic to a non-compete clause….” To keep away from any gamesmanship or intelligent contract drafting, the proposal bars de facto non-compete clauses as properly, the place, for instance, a non-disclosure settlement or coaching compensation settlement functionally “precludes the employee from working in the identical area after the conclusion of the employee’s employment with the employer.”
- Will the proposed rule influence at the moment present non-competes? The far-reaching proposal is retroactive. As drafted, it could require the rescission of any relevant non-compete clauses entered into prior to the issuance of the proposed rule, and people rescissions should be accomplished inside 180 days after publication of the ultimate rule. Furthermore, any employer rescinding a non-compete clause should present an individualized written or digital discover informing each former and present staff that the non-compete clause is not efficient.
- Are there any exceptions for job kind or revenue ranges? In a January 11, 2023, convention name relating to the brand new rule, the FTC Director of the Workplace of Coverage Planning, Elizabeth Wilkins, opined that the proposed rule would attain so far as allowed by the FTC’s jurisdiction to control “unfair competitors” and would embody each staff and impartial contractors in any respect job sorts and revenue ranges. She did be aware that the FTC is looking for touch upon whether or not traces ought to be drawn otherwise on these points, and it has been reported elsewhere that the FTC is particularly looking for touch upon whether or not non-competes for senior executives ought to be exempt or topic to a rebuttable presumption of unlawfulness.
- Are there any exceptions? Whereas the rule is broadly written, it has just a few famous exceptions. It is not going to apply to banks or non-profits (they’re outdoors FTC jurisdiction), nor to business-to-business non-compete agreements or to non-compete agreements associated to the sale of a enterprise, so long as the enterprise holder at challenge owns not less than 25% of the offered entity. Director Wilkins defined that this 25% threshold was included to shut potential loopholes relating to stockholding staff, however once more famous that the FTC is eager about feedback on the wording and performance of this exception. The FTC is at the moment accepting feedback on the proposed rule, and the remark interval is open by March 10, 2023.
- How does the rule influence the well being care business? The FTC’s proposed rule devotes important consideration to the consequences of non-competes within the well being care business and, specifically, non-competes in doctor contracts. Non-competes are a typical characteristic of doctor employment agreements, and the FTC anticipates that eliminating non-competes from doctor contracts would generate important development in doctor earnings. Regardless of the FTC’s broad statements within the proposed rule relating to doctor contracts, the actual fact stays that non-profits (who aren’t topic to the rule) are prevalent all through the healthcare business and it stays to be seen what influence the rule would have as these non-profits compete with different employers who’re topic to the rule.