The recent shifts in laws surrounding non-compete agreements have created a lot of confusion for employers and employees alike. If enacted, the non-compete ban proposed by the Federal Trade Commission (FTC) will change how businesses, particularly in healthcare and other skilled professions, manage their workforce and protect their competitive edge. 

So, what does this mean for you?

Whether you’re a healthcare professional or running a medical practice, understanding the rationale behind the non-compete ban and its potential impacts is valuable.

What Is the Non-Compete Ban?

On April 23, 2024, the FTC issued a final rule to ban most non-compete clauses in employment agreements, as they limit worker mobility, suppress wages, and stifle innovation.

Non-compete agreements prevent employees from joining or starting a competing business within a specific geographical area and timeframe after leaving an employer. The primary goal of a non-compete clause is to safeguard sensitive client information, such as unique treatment methods or valuable business strategies, that competitors could use if an employee were to leave.

The FTC’s proposed rule seeks to ban existing and future non-compete agreements across most employees, except senior executives. So, while the ban nullifies nearly all non-compete agreements, senior executives in “policy-making positions” with annual earnings over $151,164 will comply with the current non-compete contracts. Nevertheless, they would be exempt from any future non-competes.

The FTC’s non-compete ban was set to take effect on September 4, 2024. However, fortunately or unfortunately, on August 20, 2024, the U.S. District Court for the Northern District of Texas blocked the FTC’s rule, preventing it from taking effect or being enforced for now.

How Will It Impact Employees?

Non-compete agreements bind employees in a contract that often prevents them from exploring new job opportunities or starting their own business within a certain period and geographic area after leaving their employer. The American Medical Association reports that non-compete clauses affect 37% to 45% of physicians. Non-competes can restrict doctors from practicing within a set radius if they decide to leave a practice or hospital, impacting their professional growth and limiting access to care for patients in their communities. As a result, physicians may feel pressured to stay with their current employer, limiting their career options.

The potential FTC ban on non-compete agreements is likely to impact physicians positively in the following ways:

• Greater Career Mobility — Physicians would have more flexibility to explore new roles without being restricted by geographic or time-based limitations. If a doctor wants to move to a different practice, work in a nearby hospital, or even open a private practice, they’d be able to do so without legal restrictions holding them back.
• Better Work-Life Balance — Without non-competes, physicians can find work closer to home or in areas that better fit their personal and family needs. Moreover, doctors can balance their personal and professional lives more effectively, reducing burnout.
• Increased Job Satisfaction — With the leverage to negotiate fair compensation, better terms, benefits, and work environments with their employer, physicians can experience better job satisfaction.
• Improved Patient Access — A ban on non-competes would enable physicians to work for multiple hospitals or clinics, improving access to specialized care within a community. This flexibility would allow specialists to serve a broader range of patients across different facilities, helping address gaps in coverage and reducing health inequities, particularly in underserved areas. 
• Room for Innovation — Physicians interested in developing new treatment models, healthcare startups, or other innovations would have fewer legal barriers, making it easier to put new ideas to work. This freedom can foster innovation in healthcare delivery, benefiting physicians and patients by improving access, efficiency, and quality of care.

The non-compete ban certainly brings good news for physicians, freeing them from restrictive contract clauses that can limit their career choices. But, as with any crucial change, there’s another side to consider. Let's discuss the impact of the non-compete ban on healthcare employers and medical practices.

How Will It Impact Employers?

The non-compete ban could have adverse implications on medical practices and healthcare facilities. Without the protection of non-competes, practices may face unfair competition from opportunistic employees or rival facilities eager to recruit their doctors and leverage their patient relationships.

Here's how the non-compete ban will negatively impact medical practices:

• Increased Employee Turnover — The ban on non-compete clauses could lead to higher employee turnover as physicians are free to pursue roles with better pay, benefits, or work-life balance. Opening an independent practice will also become straightforward, prompting some physicians to start a private practice. This relaxation would increase recruitment and training costs for healthcare facilities as they work to fill gaps left by departing staff. 
• Revenue Loss — Most practices invest significant time and resources in training, mentorship, and continuing education for their physicians. However, a ban on non-competes introduces the risk that doctors could leave soon after gaining valuable training and experience, which could cause a substantial loss of expertise and financial investment. Practices may lose highly trained staff to competitors, potentially impacting the quality of care and leading to financial setbacks as they reinvest in recruiting and training new physicians.
• Increased Competition and Potential Loss of Patients — If a physician leaves a practice, especially in a small community, they may take a portion of their patient base with them, impacting the practice’s revenue and patient loyalty. Practices may need to work harder to retain patients and providers, requiring improved strategies and marketing efforts.
• Higher Costs for Talent Retention — Non-competes provide physicians more freedom to explore new job opportunities, but increase the risk of employee attrition. To compete, healthcare employers may need to offer more attractive salaries, enhanced benefits, and additional perks, which can drive up operational costs. This financial strain can be challenging, especially for smaller or independent practices, where resources are often limited. 
• Disruptions to Patient Care — Continuity of care is vital for patients, especially those with chronic conditions. High physician turnover can disrupt patient relationships and care plans. Healthcare leaders may need to implement systems to ensure seamless patient care, even if a physician leaves.

What Does the Future Hold?

The future of the non-compete ban remains uncertain, with legal battles ahead and political scrutiny intensifying. Although Judge Ada Brown’s ruling on August 20, 2024, in Ryan LLC v. FTC temporarily blocked the FTC’s rule, the battle is far from over. The FTC might appeal, and this issue could eventually make its way to the U.S. Supreme Court before making a final decision.

As of 2025, non-compete agreements face growing scrutiny across the United States. Currently, four states have entirely banned their use, while 33 others, along with Washington, D.C., have enacted laws restricting their use. The healthcare sector, in particular, is seeing a wave of reform. This year, Louisiana, Maryland, and Pennsylvania introduced new measures limiting non-competes for healthcare professionals, joining 17 other states, including Colorado, Indiana, Kentucky, Tennessee, and Texas, that already impose similar restrictions to promote workforce mobility and access to care.

In light of these developments, healthcare employers should carefully review and assess their existing contracts to ensure compliance with state laws and meet legal and ethical standards. You can seek legal guidance to understand the implications of non-compete agreements in your specific state and industry.

Non-compete agreements must aim to prevent unfair competition, not to stifle innovation or limit professionals’ career mobility. Focusing on fair, enforceable agreements that respect the employer’s need for stability and the employee’s right to career growth can create a balanced approach in this evolving regulatory environment.