Legal Ease: New FTC Non-Compete Ruling

Jun 30, 2024 | ANJC News & Updates

Federal Trade Commission Issues New Rule Banning Most Non-Compete Agreements

The Federal Trade Commission (FTC) issued a new rule on April 23, 2024, banning non-compete agreements in most, but not all, employment contexts. The rule follows a 2021 executive order from the Biden Administration encouraging agencies to encourage competition. Employers and trade organizations have strongly opposed the rule, asserting that the FTC does not have the legal authority to regulate competition in this way.

As passed by the FTC on a 3-2 vote, the rule applies to anyone who works for a for-profit employer, whether paid or unpaid, as well as to independent contractors. This means that chiropractic practices, both large and small, will be covered by the rule if the practice has one or more employees or contractors. An employer cannot enter a new non-compete in violation of the rule as well as cannot seek to enforce an existing, banned compete when the rule takes effect and must provide employees and contractors subject to banned non-competes written notice of its enforceability by mid-August 2024.

The FTC will be providing a standard notice form for employers to use and those who do are granted a “safe harbor” for compliance.

There are a few exceptions to the rule. First, there is an exception for non-compete agreements linked to the sale of a business. Thus, if you purchase a chiropractic practice (either its assets or shares), you can include in the sale agreement a reasonable non-compete precluding the Seller from setting up a competing practice within a reasonable geographic scope and time frame (i.e. ten-mile radius for two years). The second exception is for employees or contractors that make more than $151,164 per year and are in a position to make policy for the company. This would include officers or other high-level managers of the company that have autonomy to make policy decisions for the company (i.e. Clinical Manager that makes more than $151,164 who can implement policies such as clinical care policies, hiring and firing, purchasing, etc., without prior approval).

The author of Legal Ease/Legal Q&A (Jeffrey Randolph, Esq.) is an independent person of the ANJC and his views are not authorized, sponsored, or otherwise approved by the A.N.J.C. The information provided is for general guidance on matters of interest only and may not take into account particular facts relevant to your individual situation. The application and impact of laws and health care can vary widely based on the specific facts involved. Given the changing nature of laws, rules and regulations, there may be omissions or inaccuracies in information contained in these materials. Accordingly, the information you receive is provided with the understanding that the author and the A.N.J.C. are not herein engaged in rendering legal, accounting, tax, health care or other professional advice and services nor are they providing specific advice with regard to your practice, the treatment of any specific illness, disease, deformity or condition, or any other matter that affects trade, commerce, or legal rights of others. As such, this article should not be used as a substitute for consultation with professional accounting, tax, legal, health care, or other competent advisers. Before making any decision or taking any action, you should consult an appropriately trained professional.