FTC Rule Bans Employment Non-Compete Agreements (SNF/AL)

On April 23, 2024, the Federal Trade Commission (FTC) issued a final rule to promote competition by banning employment non-competes in most circumstances nationwide. 

About one in five U.S. workers — approximately 30 million people — are bound by a non-compete clause/agreement; thus, they are restricted from pursuing better employment opportunities. A non-compete clause is a contractual term between an employer and a worker that blocks the worker from working for a competing employer or starting a competing business, typically within a certain geographic area and time period after the worker’s employment ends. Because non-compete clauses prevent workers from leaving jobs and decrease competition for workers, they lower wages for both workers who are subject to them as well as workers who are not. Non-compete clauses also prevent new businesses from forming by subduing entrepreneurship and preventing innovation, which would otherwise occur when workers are able to broadly share their ideas. 

Under the FTC’s new rule, existing non-competes for the vast majority of workers will no longer be enforceable after the rule’s effective date, which will be 120 days after publication in the Federal Register. Employers will be required to provide notice to workers, other than senior executives who are bound by an existing non-compete, that they will not be enforcing any non-competes against them.

By banning non-compete agreements nationwide, the FTC estimates its rule will: 

• Reduce health care costs: Banning non-competes could lead to a $74-194 billion reduction in physician services spending. 
• Enhance entrepreneurship: The rule could spark a 2.7% increase in new business formation, resulting in over 8,500 additional new businesses created each year.  
• Increase innovation: The number of patents filed each year could surge by an average of 17,000-29,000, representing 11-19% annual growth over the next 10 years. 
• Bolster worker earnings: Workers could see an average annual rise of $524, translating to a total of $400-488 billion in additional wages over the next decade.  

While Michigan antitrust law does currently permit limited non-compete agreements in certain circumstances, this rule would apply nationwide when it becomes effective. AHCA developed a five-page summary of the final rules, as well as their potential impacts on LTC providers. Use your AHCA login to access it here. (If you are an HCAM member, you are automatically an AHCA member. AHCA member login is required to participate in the webinar; click here if you have not yet set up your AHCA login (which is different from your HCAM login).