As most practices are now aware, the government will start banning non-compete agreements in September, assuming current litigation doesn’t affect the implementation date. If you’re furiously working to notify staff members that their non-competes will no longer be in effect, keep in mind that some of your employees may still be subject to them. Why? Because there are some exceptions to the non compete ban that every practice manager should know.
Check out three key situations that may qualify your practice for an exemption from the new non compete ban.
Senior Execs With Preexisting Agreements
Senior executives who already have an existing non-compete in place are still going to be bound by those agreements, the FTC says. These execs are exempt from the new non compete ban.
What’s a senior executive? The government defines the term “senior executive” as a worker earning more than $151,164 who is in a “policy-making position.”
A “policy-making position” includes a firm’s president, chief executive officer or the equivalent, any other officer with policy-making authority, and any other natural person with policy-making authority similar to that of an officer’s.
Policy-making authority entails the “final authority to make policy decisions that control significant aspects of a business entity or common enterprise” but does not include authority limited to advising or exerting influence over such policy decisions or having final authority to make policy decisions for only a subsidiary of or affiliate of a common enterprise.
Essentially, this refers to an executive who has policy-making authority, and is earning more than $151,164.
Business Sale Terms
If one of your business owners is selling their ownership interest and all their operating assets, you can still impose a non-compete agreement. This is considered logical by most legal experts, since most business sales involve about a two-year non-compete agreement so the prior business owner and the new business owner won’t be in competition with one another.
This keeps the former business owners from simply setting up a similar practice next door and taking their old patients with them. Such a situation would leave the new practice owner without the book of business that they thought they were buying from the sellers.
Certain Nonprofit Organizations
Many nonprofit organizations will be exempt from the non compete ban, but not all of them.
Here’s why: Nonprofits do not fall under the purview of the Fair Trade Commission, but in the final regulations that got published in the Federal Register, the FTC said they will really look at these nonprofits, particularly health care institutions, and if they’re carrying on their business for the profit, they’re not going to consider them to be a nonprofit.
Therefore, nonprofits that operate as nonprofit organizations will be exempt from the non compete ban, but those which don’t operate as nonprofits are likely to face challenges, and may not be able to enforce non-compete agreements.
If you’re part of a nonprofit organization and you aren’t sure if the new non compete ban applies to you or not, talk to a qualified health care attorney who can offer advice and counsel.
Avoid fines and penalties with a strong compliance program once the new non compete ban goes into place, with help from attorney Kelly Holden, JD. Check out her latest online training, Comply w/New FTC Employee Non-Compete Ban to Avoid Penalties, to get the details you must know to stay compliant. Register today!
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