FTC Ruling – Non-Compete Clauses

Adrienne Hersh, JD, joins Marc Abla, CAE, to discuss the FTC’s recent notice of rule regarding non-compete clauses.

Referenced Links:

Review Your Employment Agreement Forms: Starting January 1, 2022, New Law Restricts Non-Competition and Non-Solicitation Clauses
New Rules Regarding Non-Compete Clauses and Contracts

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Transcript:

Marc:
Today, Adrienne Hersh, Illinois Chiropractic Society’s General Counsel is joining me for a quick conversation about some activity that just happened yesterday. The FTC or the Federal Trade Commission, took action on some rules that they published in draft back in January, and passed, and they’re going to go into final format set accurately describe kind of what’s happened, Adrienne?

Adrienne:
Yes, they will be released for publication, and they will be published in the Federal Register very soon, which means that they will be adapted about 120 days later.

Marc:
Now, why is this important to you? Well, it actually impacts non-compete clauses in nearly all contracts, not all of them nearly all contracts. So what do you how do you think that this might impact our doctors in the future? Right?

Adrienne:
Well, many of them are covered in their practices under these non-compete agreements. And in the past, courts have started to disfavor them, even before this rule came out. But they’ve allowed them if they were restricted to certain geographical areas and certain time periods. But this rule effectively, is going to completely wipe those out so that doctors are no longer restricted, they can leave one job and go set up shop next door or work for the doc down the street, they’re not going to have those restrictions anymore. The thinking being that we need healthcare providers, and we need the public to have access to them, and in the healthcare arena, this was restricting access to healthcare.

Marc:
Yeah, and what’s really interesting is that specific rulemaking is not like targeting healthcare, but obviously has an impact on healthcare, because a large portion of providers are covered under these non-compete clauses. Now. It’s also really important as we started off the call, Adrienne, once this is published in the Federal Register, which we believe is going to be really soon, right?

Adrienne:
Correct.

Marc:
There’s gonna be a 120-day gap before it actually takes effect. And so in that meantime, it still does not negate the information that we’ve previously published, that it’s specific to Illinois that has very specific requirements, and limitations on when non-compete clauses can be utilized under contracts in Illinois. Right?

Adrienne:
Correct. And we do have an article out there on our website that spells all of that out and what the allowed parameters are right now. And they’ll stay in effect for 120 days, at least.

Marc:
And we’ll link that down below as well. So you all have access to that. You know, there’s there’s a lot of things at play. So one, we have this gap. But here’s what’s very interesting is we actually were talking about it this morning. And not about 15 minutes after our conversation earlier this morning. Up popped on the news that the Chamber of Commerce has already actually filed suit to stop the enactment of this particular rule. So we do anticipate really over the next 120 days seeing a number of lawsuits filed to prevent this from going into play over the next 120 days.

Adrienne:
That’s That’s right, Marc. So we don’t know for sure where this is going to end up. And certainly, healthcare is not the only industry that’s going to be challenging this, this rule. So there’s going to be just a flood of litigation probably about this. And we don’t know right now where it’s going to end up. But we know that our members would like to know for how long their current non-competes are going to be in effect. And we can tell them, at least until further notice until the rules are adopted in 120 days. And if we hear of any injunctions or court rulings that change that will certainly let our members know.

Marc:
Yes, exactly. We will keep you abreast as far as what’s going on. In the meantime, at least for the next, you know, a handful of months. It still does not change current Illinois law. Once we have further information once we know how some of the courts are going to rule on this over the next few months, and see what this looks like we will definitely keep you all appraised, but know that current law still is in place. So if you’re here and say, well, the courts are going to change it at the end of the day, we still have the Illinois law that’s going to govern your current contract. So don’t lose sight of that and we will keep you informed.

Adrienne:
But if you’re negotiating something right now, you know know that it may or may not hold in the near future. On either end as employer or employee.

Marc:
Perfect. Hopefully, this helps you out and we will catch you next week. Thanks, Adrienne for joining me today and talking about this strange and complicated legal subject.

Adrienne:
It was my pleasure.

Marc:
Thank you