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FTC Rule Bans Non-Competes, What That Means for Your Med Spa
April 25, 2024
In a groundbreaking decision on Tuesday, April 23, the Federal Trade Commission (FTC) issued a final rule to ban non-competes nationwide. Non-compete agreements are clauses within employment contracts that prevent employees from working for a competing business. This shift in U.S. labor policy will have a significant impact for employers and employees within the healthcare industry where non-competes are often implemented. These regulations will take effect in 120 days.
So, what does this mean for the hiring process and employment contracts for your aesthetic medical practice? Let’s break down the FTC’s ruling and what this means for each party involved:
Employers
Under the final rule, employers nationwide are prohibited from using non-compete agreements in employment contracts that restrict employees from working for or starting a competing business. Employers must now reevaluate their hiring process and employment contracts to comply with the FTC’s new regulations.
Employees
Both independent contractors and workers of an employer, whether paid or unpaid, are subject to this rule. Employees now have the freedom to pursue new career opportunities within their industry without legal restriction. This decision represents a significant milestone for labor policy and employee rights.
Existing non-competes
Existing non-competes can only remain in force for senior executives who earn more than $151,164 annually and who are in policy-making positions. While existing non-competes for all other employees do not have to be formally rescinded, employers will have to provide notice to those employees that the agreements will no longer be enforced against them. New non-competes will be banned for all employees including senior executives. We recommend consulting with legal counsel regarding proper compliance within your state as legal challenges are likely to arise.
Alternatives to non-competes
You have other options to protect your practice’s sensitive information, patient records and other investments without needing to resort to non-compete agreements. Employers can enforce trade secret laws and non-disclosure agreements (NDAs) to safeguard their business’ interests. To retain staff without non-competes in place, the FTC recommends shifting hiring strategies to improving the work environment and offering competitive compensation packages.
In conclusion
We reached out to our trusted healthcare attorneys at Dental & Medical Counsel, P.C. for their legal perspective regarding the FTC’s final rule:
“The FTC’s ban on non-compete agreements signals a shift in labor policy, prompting aesthetic medical practices to rely more on alternative legal instruments like NDAs and trade secret laws to protect proprietary procedures and information. Assuming the law is not challenged, practices must now prioritize creating an appealing work environment through investment in employee development with technology such as HR for Health and competitive compensation while bolstering legal frameworks for confidentiality and data protection to navigate the new regulations and retain top talent effectively.” – Ali Oromchian, J.D., LL.M., Dental & Medical Counsel, P.C.By remaining informed, adhering to legal advice and using proactive compliance techniques, your aesthetic medical practice can adapt to this change and thrive. Contact us to learn how our business consulting services can help you navigate today’s ever-changing business environment.