The Federal Trade Commission (FTC) issued a final rule April 23 that banned a majority of U.S. businesses from including noncompete clauses in employee contracts. According to the agency, the move is designed to protect “the fundamental freedom of workers to change jobs, increasing innovation and fostering new business formation.”
“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” FTC Chair Lina M. Khan said in a statement announcing the news. “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”
Once the final rule is effective—in approximately 120 days—noncompetes “for the vast majority of workers” will not be enforceable. Senior executives in “policy-making positions” who earn more than $151,164 per year are exempt, as are nonprofit organizations. In its final rule, however, the FTC emphasized that hospitals and other healthcare providers claiming tax-exempt status will not necessarily be viewed as nonprofits.
The final rule also includes examples submitted by commenters that detail how noncompete clauses have negatively impacted their ability to start a new business. Three of those comments came from workers in the healthcare industry, including one practice owner who says they spent $24,000 in legal fees just to challenge a noncompete clause that limited their options after they left a “large healthcare organization” due to burnout.
Cardiologists, thoracic surgeons and other healthcare groups respond to FTC ban of noncompete clauses
The Society for Cardiovascular Angiography & Interventions (SCAI) issued a statement in support of the move, signaling that interventional cardiologists are excited about its potential impact on employee contracts.
“The FTC rule on noncompetes was needed to address the abuse of these clauses by for-profit and nonprofit hospitals and hospital systems,” SCAI President George D. Dangas, MD, PhD, said. “The use of noncompete clauses by these large employers to restrict physicians’ right to seek gainful employment went far beyond protecting health care employers who invested resources into physician recruitment and training. A ban on noncompetes will improve patient access to care and level the playing field for physicians seeking an opportunity to advance their careers. We also urge stakeholders to take steps to protect independent physician practices that dedicate substantial resources to hiring and training physicians.”
The Society of Thoracic Surgeons (STS) shared its own statement of support, saying the FTC’s “groundbreaking rule” will give cardiothoracic surgeons more freedom and “ensure patient access to specialized surgical services”
"STS members and the broader physician community will benefit from the ban on noncompetes," said STS President Jennifer C. Romano, MD, MS. "Eliminating noncompete clauses removes major barriers for cardiothoracic surgeons, enhancing their ability to decide where and how they practice without undue restrictions. This change is especially crucial in improving access to specialized surgical care across various regions, fostering a more dynamic and responsive healthcare system."
However, the STS did note that the “unfortunate exclusion of most non-profit hospitals” will limit its overall impact.
The American Hospital Association (AHA), meanwhile, opposes the FTC’s decision, saying it “errs by seeking to create a one-size-fits-all rule” and “Congress has not granted the FTC the authority to act in such a sweeping manner.” The group’s 18-page response to the FTC’s final rule is available here.
The American College of Cardiology, meanwhile, did not have any new comments related to the FTC's final rule. Click here to read some of the group's thoughts on the topic from back in 2023.
An early legal challenge
When the FTC announced its final rule, many industry experts noted that it would likely be challenged in court—and that already appears to be the case. The U.S. Chamber of Commerce filed a lawsuit on April 24, vowing to “block this unnecessary and unlawful rule and put other agencies on notice that such overreach will not go unchecked.”
“The FTC’s decision to ban employer noncompete agreements across the economy is not only unlawful but also a blatant power grab that will undermine American businesses’ ability to remain competitive,” U.S. Chamber of Commerce President and CEO Suzanne P. Clark said in a statement. “Since its inception over 100 years ago, the FTC has never been granted the constitutional and statutory authority to write its own competition rules.
Michael has more than 16 years of experience as a professional writer and editor. He has written at length about cardiology, radiology, artificial intelligence and other key healthcare topics.