The Federal Trade Commission’s new rule banning noncompete clauses in employment contracts signals its ambition to change practices at nonprofit tax-exempt hospitals, McGuireWoods healthcare partner Timothy Fry said in a May 21, 2024, story in Law360.
The FTC recently issued a final rule to ban noncompetes nationwide. The FTC’s authority only covers the activities of for-profit ventures or corporations, but its final rule states that healthcare organizations claiming tax-exempt status as nonprofits aren’t beyond its jurisdiction.
Fry told Law360 that it’s possible the FTC is trying to encourage nonprofit hospitals to give up on noncompetes.
“[T]he FTC has made a point of signaling that, with respect to nonprofit tax-exempt hospitals, at least some are within its jurisdictional limits,” said Fry, who advises clients on regulatory and compliance matters in the healthcare industry.