Ban on noncompete clauses

Dear State and Specialty Executive Directors,

Yesterday, the Federal Trade Commission voted 3-2 to finalize a rule banning non-compete clauses in employment contracts. The proposed rule issued in January 2023 received over 26,000 comments from stakeholders with an overwhelming majority supporting the change. The AOA submitted comments to the FTC along with 45 osteopathic affiliates – thank you for your partnership on advocating for this important issue. Our letter expressed support for limiting the use of non-compete clauses in employment contracts and concern for the impact these restrictions have on physician autonomy, career mobility, and their relationship with patients. The rule will ban both traditional non-compete clauses, as well as “de facto non-compete clauses” that function in the same manner. The rule also contains limited exceptions, which include the following:

• Senior executives with existing non-competes, although once the rule becomes effective, businesses may not include non-competes in new contracts issued to senior executives; and

• Noncompete clauses that are entered into by a person pursuant to a bona fide sale of a business entity or of a person’s ownership interest in a business entity.

The rule generally does not apply to non-profit organizations due to FTC’s lack of authority to regulate these entities. However, the agency lays out illustrative examples of when a non-profit organization’s practices can result in it falling within FTC’s jurisdiction.

While the rule is slated to be effective as of August 21, 2024, it will likely face legal challenges. The AOA will continue to work with FTC and other agencies to advance policies that support strong healthcare markets across the country.



John-Michael Villarama, MA

Vice President, Public Policy and Federal Affairs

American Osteopathic Association

Office: 202-349-8748

Cell: 202-270-4389

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