In
Part B News’ coverage of the FTC’s noncompete rule – unveiled on April 24, scheduled to be officially published on May 7 and put into effect 120 days thereafter – we mention a “senior executive” exemption to the rule’s sweeping ban on the sort of restrictive covenants that figure in many physician contacts.
The original story noted that while, by FTC’s standard, a senior executive would be one making at least $151,164 and having a “policy-making” role in the business, “it’s not clear how this will play out in practice.”
We asked Carrie Amezcua, antitrust counsel with Buchanan Ingersoll & Rooney P.C. in Philadelphia and author of an
advisory on the rule, how this might affect a medical director or medical department head – who would probably qualify on both salary and “policy-making” grounds – who was also a working physician. She provided us with a more detailed analysis:
First, Amezcua notes, FTC specifically stipulates that a senior executive means a worker who:
- Was in a policy-making position; and
- Received from a person for the employment total annual compensation of at least $151,164 in the preceding year, or compensation of at least $151,164 when annualized if the worker was employed during only part of the preceding year, or total compensation of at least $151,164 when annualized in the preceding year prior to the worker's departure if the worker departed from employment prior to the preceding year and the worker is subject to a non-compete clause.
“So long as the medical director meets this definition, a current post-employment noncompete agreement is still enforceable,” Amezcua says. “However, no new noncompete agreements could be entered into after the effective date.”
Amezcua also mentions another exemption little mentioned in coverage of the rule, which applies to “noncompete agreements that are entered into pursuant to a bona fide sale of a business. For example, if an independent physician sells their practice to another physician or organization, the physician can be subject to a noncompete as a condition of sale.”
If a physician or group of physicians is currently in litigation over a noncompete to which they feel they should not be subject, Amezcua notes, “the rule actually exempts any ‘causes of action’ that arise prior to the effective date of the rule. So current lawsuits can still go forward.”
The rule is currently being challenged in court by several parties, each seeking a temporary injunction to stay the rule, which has not at this writing been granted by the court. Follow Part B News for new developments on the FTC's rule and its aftereffects.