The recent implementation of a federal rule, banning the use of worker noncompete agreements within the healthcare sector, shines a spotlight on the nonprofit industry and notable applicability exemptions related to the new regulation. The rule, overseen by the Federal Trade Commission (FTC), generates significant relevance for the approximately 3,000 nonprofit, tax-exempt hospitals operating across the U.S—amounting to almost 60% of all hospitals nationwide.
The rule’s enforcement is strictly against corporations “organized to carry on business for its own profit or that of its members”. With that in mind, the FTC’s forthcoming rulings will inevitably determine how many hospitals from the non-profit demographic remain unaffected by the regulation. The rule in question establishes nearly a complete prohibition on noncompete clauses, especially those that may prevent workers from transitioning jobs within their respective industry.
Litigious challenges and FTC’s examinations of nonprofits operating similarly to their for-profit counterparts add another layer of complexity. What’s more, this rule could potentially disrupt the healthcare and non-profit sectors while raising crucial questions about the definition of non-profit and taxable entities.
The full text of the original FTC noncompete rule announcement can be viewed on their website. For more on this topic, you can view the original article on Bloomberg Law’s website.