Healthcare industry diagnoses impact of FTC’s noncompete rule

Last year, the Federal Trade Commission (FTC) issued a proposed rule to ban most noncompete agreements nationwide, with very limited exceptions. The sweeping rule forbids any contractual term between an employer and a worker that prevents the worker from accepting employment with a competitor or operating a competitive business after the conclusion of the worker’s employment with the employer. The proposed rule also includes an expansive definition of “worker,” including employees, independent contractors, interns, and even volunteers, and includes no exception for executive or highly compensated employees. After more than a year, during which the public, and the healthcare industry in particular, offered comments, the FTC voted 3 to 2 on April 23, 2024, to issue a final rule very similar to its proposed rule.

Healthcare industry’s impact on the proposed rule

The FTC focused on health care and physicians when drafting its proposed rule, reportedly looking to a 2017 paper published in Management Science titled “Screening Spinouts,” which evaluated the economic effects of noncompete agreements on the healthcare industry. And according to FTC Chair Lina Khan, the healthcare industry gave more feedback on the proposed rule than any other sector.