FTC Issues Rule Banning Noncompetes

On April 23, in a decision that will have a major impact on PAs across the country, the Federal Trade Commission (FTC) voted 3-2 to finalize a rule that bans noncompete agreements in most instances. The final rule, which goes into effect on September 4, 2024, requires employers to notify employees that their current noncompetes are no longer in place.

The FTC received more than 26,000 comments regarding the proposed rule, an overwhelming number of which were in favor of banning noncompetes. The Academy submitted comments in support of eliminating noncompete agreements.

The main exception to the new rule is that it will not eliminate noncompete agreements currently in place for senior executives who meet certain criteria. Additionally, the final rule addresses questions and issues surrounding applicability to non-profits/not-for-profits, including healthcare practitioners working in hospitals and other facilities that claim tax exemption but who are employed by an affiliated for-profit group. The final rule addresses these scenarios, including what the FTC has jurisdiction over.

Extensive litigation is expected in the coming months regarding the implementation of the rule. For more information on the new rule, please see the following:

FTC Announcement

FTC Fact Sheet

Final Rule as Published in the Federal Register (May 7, 2024)