The Federal Trade Commission made headlines in April by banning most noncompete agreements. Such restrictive covenants, for example, might bar an associate veterinarian who signs one from going to work at a practice across town.
The 3-2 vote outraged the business world. The U.S. Chamber of Commerce quickly filed suit in an attempt to kill what’s formally called the Noncompete Clause Rule.
Labor attorney Brent R. Pohlman, a colleague of Legal Lingo columnist Peter H. Tanella’s, predicts a lengthy court fight and postponement of the rule’s implementation. “I expect it to go to the Supreme Court,” he said.
Here’s what he is telling veterinary professionals and practice owners:
- On the rule’s validity: “The ultimate issue is whether the FTC usurped the authority of Congress by enacting the rule. There’s a difference between administrative rulemaking and promulgating legislation.”
- On current noncompete agreements: “The rule doesn’t insulate employees from breaches prior to the rule’s effective date. An employee would still be subject to any penalties, restrictions and injunctive relief that the contract provides. You can ask whether an employer will pursue litigation, but the rule says any breach prior to the effective date can still be enforced.”
- On allowing current agreements with senior executives to continue: “The rule identifies two specific positions: CEO and president, or a position with a similar role or authority. After that, the exemption applies to individuals with policymaking authority, and it has to be more than advice or influence. It has to be an individual with the ability to implement policies that relate to significant aspects of a veterinary practice’s operations. And they have to make more than $151,000 a year in base compensation and bonuses.”
- On noncompete agreements for senior executives after the effective date: “The exemption is only for existing agreements. It’s not as though there will be a senior executive exemption in perpetuity. The FTC put the exemption in place to provide businesses with a level of protection with respect to their most senior people and plan how to address it going forward.”