What the FTC's ban on noncompete clauses means for physicians

UPDATES: A federal judge partially blocked the new FTC noncompete rule on July 3, 2024, pending further review. The U.S. District Court for the Northern District of Texas enjoined the FTC from implementing and enforcing its rule on Aug. 20, and the FTC appealed that decision on Oct. 18. The FTC also has an appeal pending in a federal court in Florida, increasing the likelihood that the U.S. Supreme Court may eventually decide the issue.  

This post will continue to be updated as judicial proceedings progress.

The Federal Trade Commission (FTC) voted 3-2 on April 23 to ban non-compete agreements for workers in for-profit companies — a decision that will apply to many employed physicians.

The new FTC rule is set to take effect 120 days after publication in the Federal Register, barring a legal injunction (the U.S. Chamber of Commerce and other business groups have sued to stop the rule).  

The rule prohibits employers from taking the following actions:¹

1. Entering into or attempting to enter into a non-compete clause,
2. Enforcing or attempting to enforce a non-compete clause,
   
3. Representing that a worker is subject to a non-compete clause.

Employers will also be required to notify workers already bound by noncompetes that they will not be enforced.²

The FTC ruling will expand job opportunities for many physicians employed by for-profit health systems, private equity firms, or other corporations who were previously constrained by noncompete clauses.

“The American Academy of Family Physicians (AAFP) is pleased to see the Federal Trade Commission take concrete action to ban noncompete clauses in employee contracts,” AAFP president Steve Furr, MD, FAAFP, said in a news release.

There are some exceptions to the FTC’s ruling, however. It does not apply to senior executives who earn more than $151,164 per year and work in policy-making positions.² It also does not technically apply to nonprofit employers, who are not subject to the FTC’s authority. But FTC commissioner Rebecca Kelly Slaughter said she reserves the right to enforce the noncompete ban on nonprofits that behave like for-profits.  

“If you claim non-profit tax status but are really organized for the profit of your members, you are within our jurisdiction and covered by the rule,” Slaughter said.³

Dr. Furr stated, “We are encouraged to see that the FTC intends for this ban to extend to many nonprofit entities. Nonprofit health systems often have significant financial assets and employ a large portion of physicians and clinicians. They should not be permitted to continue to restrict patient access and physician choice in employment.”

Physicians who work for nonprofit organizations may hear conflicting information about whether the ban applies to them. Their employers may be consulting with their attorneys, examining business practices, and waiting for litigation on this ruling to move through the courts.⁴

Kyle Claussen, an attorney with Resolve (an AAFP Member Advantage Partner), wrote in a blog post that the best course of action for physicians is “to educate yourself on the new ruling, stay up-to-date with the latest developments to the new rule, and demand the removal of a non-compete from your contract if you are in current negotiations.”⁵

For more information, see the webinar Resolve hosted on this topic.

If you have questions about how the ruling may impact your current or future employment contract, consult an experienced health care attorney.

The AAFP also has a webpage with more information on noncompete rules in physician contracts.

—  Angela M. Lanigan, MPA, RD, LD

1. Packel EE, Schuering ER, Gilbert SM, Weber JT, Kar A, Weimer RT. FTC final rule banning most non-competes passes — what you need to know. Nat Law Rev. 2024;14(120). https://natlawreview.com/article/ftc-final-rule-banning-most-non-competes-passes-what-you-need-know

2. Federal Trade Commission. FTC announces rule banning noncompetes. April 23, 2024. Accessed April 24, 2024. https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes

3. Federal Trade Commission. Remarks of commissioner Rebecca Kelly Slaughter supporting the final rule banning noncompete agreements. April 23, 2024. Accessed April 29, 2024. https://www.ftc.gov/news-events/news/speeches/remarks-commissioner-rebecca-kelly-slaughter-supporting-final-rule-banning-noncompete-agreements

4. Zerkle J, Kuczynski M, Schultes LM, Gilbert SM. FTC final rule banning most non-competes passes – what nonprofits need to know. Nat Law Rev. 2024;14(120). https://natlawreview.com/article/ftc-final-rule-banning-most-non-competes-passes-what-nonprofits-need-know

5. Claussen K. The FTC non-compete ban – impact on physicians. Resolve blog. April 24, 2024. Accessed April 29, 2024. https://www.resolve.com/blog/general-education/the-ftc-non-compete-ban-impact-on-physicians

Posted on April 29, 2024 by FPM Editors