FTC Bans Noncompete Clause: What Does It Mean for Nurse Practitioners?

Have you experienced restrictions or limitations because of a noncompete clause in your contract? If you had to contend with a noncompete clause in the past, you understand how limiting and frustrating it can be.

But first, let’s define what it is.

What Is a Noncompete Clause?

Typically, a noncompete clause is part of an employment contract. It limits or prevents a worker from working for competitors for a set amount of time after leaving employment.

It may also prevent someone from opening a business within a pre-defined geographical area, limit them from working for a particular type of business, or prevent them from starting a competing business altogether.

For example, let’s say you want to start your own practice, and many of your current patients can’t wait for you to open your doors. However, because of a noncompete clause, you can’t open your practice for at least two years.

That’s a shame, and your patients can’t wait that long.

Good for Employers, not Employees

While a noncompete clause benefits and makes sense for employers, they don’t work so well for employees.

FTS chair Lina M. Khan explains…

Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” and that “The FTC’s final rule to ban noncompetes will ensure Americans have the freedom to pursue a new job, start a new business, or bring a new idea to market.”

Noncompetes have existed for a long time, a very long time; they date back to the Middle Ages. You can find it here if you want to know more about their history.

But a long history doesn’t mean noncompetes haven’t been challenged before. They have.

FTC Ruling

And so, the FTC ruled to ban noncompete clauses for workers in for-profit companies. This regulatory action by the U.S. Federal Trade Commission is geared to promote fair competition and worker mobility.

The rule, issued in April 2024, categorizes noncompete clauses as “an unfair method of competition” under Section 5 of the Federal Trade Commission Act. This classification prevents most employers from entering or enforcing noncompete agreements with their workers.

The ban intends to increase innovation, raise wages, and stimulate the creation of new businesses by removing restrictions that prevent workers from moving freely between jobs or starting new ventures.

In the future, the rule prevents employers from entering new noncompete clauses with employees after the effective date in August 2024

Please note that some exceptions to this rule affect senior executives and specific business circumstances.

Opposition?

It should come as no surprise that the FTC’s decision has faced significant opposition and legal challenges, particularly from business groups.

There is concern over maintaining a competitive advantage and the return on investment in employee training and development when employees can move between employers at any time. The idea is: “What is the benefit to us investing time and money in developing employees?”

Only time will tell if the FTC ruling will stand as is or if it will undergo some level of modification.

Assuming the FTC ruling will stand, how might it affect our profession?

Impact on Employed Nurse Practitioners:

How might the recent FTC rule affect employed NPs? The impact could be realized in several ways…

Increased Job Mobility:  Employed NPs will have greater freedom to change jobs without the legal constraints of noncompete agreements. This increased mobility allows NPs to seek better employment opportunities, potentially leading to improved working conditions and higher salaries.

Increased Negotiating Power:  With the ability to move freely between employers, NPs may have more leverage to negotiate better terms of employment, such as salary, benefits, and working hours.

Career Development:  Without noncompetes, NPs can pursue roles that more closely match their career aspirations, including positions that offer more responsibility or specialize in areas of interest.

Impact on Nurse Practitioner Business Owners:

For employed NPs considering starting a practice or those currently in practice, the absence of noncompetes affects them on several levels:

Free from Restrictions:  The most significant positive impact will be the ability to choose where to practice, when to start a practice, and what services to offer in one’s practice. Finally, NPs no longer need to worry about violating a noncompete clause but can do what’s right for them.

But there may also be some less desirable consequences…

Competitive Pressures:  NPs running their own practices might face increased competition as more practitioners can enter the market without noncompete restrictions. Additionally, it might become more challenging to retain top talent as employees may leave more freely for competing practices.

Strategic Adjustments:  Practice owners may need to focus more on creating and maintaining a positive workplace culture and offering competitive compensation to attract and retain staff.

Practice Building:  Due to increased competition, there may be a need to invest more in marketing and patient engagement strategies to keep growing the practice.

Overall Impact on Nurse Practitioners: 

Both employed and self-employed NPs must be aware of the legal changes and prepare for potential financial implications. They may need to consult legal experts to verify and revise contracts and ensure compliance with the new FTC ruling.

All Nurse Practitioners must be informed about the current changes to noncompete clauses and follow along with future developments.

NPs might also explore new opportunities for career growth and professional development in this evolving landscape.


Do you have first-hand experience with non-compete clauses?

Let us know, and share your story with us…

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