Federal Ban on Non-Competes
Highlights
The FTC’s new rule banning most non-compete agreements will go into effect Sept. 4, 2024
Healthcare entities will want to follow this final rule closely, as legal challenges may delay enforcement of the rule’s provisions
Even after the rule is in effect, there are limited exceptions for non-competes involving senior executives entered prior to the rule and those involving the sale of a business
There is still some ambiguity on how the rule applies to nonprofit entities, including nonprofit health systems
On April 23, 2024, the Federal Trade Commission (FTC) rolled out its final rule essentially banning non-compete agreements. The new rule will go into effect Sept. 4, 2024, and will affect, according to the FTC, 30 million people or 18 percent of the American workforce who are under some form of non-compete agreement. Employers, including hospitals and other health care industry entities, who fail to abide by the new rule may face an adverse FTC enforcement action, prohibitive injunctions and, ultimately, civil penalties amounting to $10,000 per individual offense.
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