FTC proposes ban on employee noncompete clauses

Hospitals due $9B under 340B final rule

January 05, 2023


The Federal Trade Commission seeks to ban noncompete clauses, contract provisions used by many healthcare employers that allegedly suppress wages, limit innovation and deter new businesses, through a proposed rule published Thursday.

According to the agency, the regulation would boost wages by up to $296 billion a year by outlawing the use of noncompete provisions and rescinding current clauses across all industries. Researchers estimate that at least 40% of physicians are held to restrictive covenants that typically prevent them from working for competitors within a 30-mile radius for one or two years. These contracts are even more widely used and strictly enforced in the insurance and pharmacy benefit manager industries, experts said.

Noncompete contract provisions, particularly when they involve low- and middle-income workers, rarely benefit both parties, said Barak Richman, a law and business professor at Duke University.

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