Implications of Proposed Rule to Eliminate Non-Compete Clauses in Employment Contracts

On January 5, 2023, the Federal Trade Commission (FTC) proposed a new rule to bar employers from including non-compete clauses in contracts with their employees. The far-reaching proposal is retroactive and as drafted would require the rescission of any applicable non-compete clauses entered into prior to the issuance of the proposed rule, and those rescissions must be done within 180 days after publication of the final rule.

This proposal would not apply to banks or non-profits (they are outside FTC jurisdiction), nor to business-to-business non-compete agreements or to non-compete agreements related to the sale of a business, as long as the business holder at issue owns at least 25 percent of the sold entity. The proposed rule includes significant dialogue relative to effects of non-competes in the health care industry and, in particular, non-competes in physician contracts.

The FTC anticipates that eliminating non-competes from physician contracts would generate significant growth in physician earnings.

Read more about non-competes in the healthcare industry.