Noncompete and No-Poach Agreements in Healthcare: Navigating the FTC’s Proposed Noncompete Rule, the NLRB’s General Counsel Memo on Noncompetes, Rapidly Changing State Laws, the DOJ’s Criminal No-Poach Prosecutions, and Private Litigation

Description

Many life sciences companies and other healthcare providers have encountered noncompete, no-poach, and other restrictive covenant agreements. These agreements are often a condition of employment or are used to prevent unfair competition and protect employers' trade secrets and customer relationships.

In January 2023, the Federal Trade Commission (FTC) proposed a rule that would ban noncompetes nationwide, without a narrow carveout for noncompetes entered into in connection with the sale of a business. Healthcare is one of the industries spotlighted in the proposed rule. However, the Supreme Court's 2022 decision in West Virginia v. EPA and its 2023 decision in Biden v. Nebraska may have cast the FTC's authority to do so into serious doubt.

In May 2023, the General Counsel of the National Labor Relations Board (NLRB) issued a memorandum instructing the Labor Board’s Regional Directors of her position that noncompete clauses for employees protected by the National Labor Relations Act (NLRA) (i.e., nonmanagerial and nonsupervisory employees) in employment contracts and severance agreements violate federal labor law except in limited circumstances.

In addition, both the FTC and the NLRB have announced settlements of enforcement actions against employers involving the use and enforcement of noncompetes, and the Department of Justice (DOJ) has continued prosecuting companies under antitrust laws for the use of naked no-poach agreements.

In addition to the FTC’s proposed rule and the NLRB’s General Counsel memo, the healthcare industry must also consider state laws regulating the use of restrictive covenants. Just this year alone, at least 84 noncompete bills have been introduced in 33 state legislatures, with some 32 of them focused on the healthcare industry in one way or another. Indeed, Minnesota passed legislation banning noncompetes statewide effective July 1, 2023, and the New York legislature passed a noncompete ban (with no exception for sale of a business noncompetes) that is currently awaiting the Governor’s signature or veto.

Listen as our authoritative panel discusses the implications of the FTC’s proposed rule, the NLRB’s General Counsel memo, and evolving state laws for the use of noncompete and no-poach agreements in the healthcare industry. The panel will also examine the DOJ’s ongoing no-poach prosecutions and the potential for private litigation. The panel will also offer best practices for navigating noncompete and no-poach agreements in healthcare.