The Federal Trade Commission’s near-total ban on non-compete agreements sent a significant signal through the healthcare industry when it was announced, and the dental sector was no exception. Brent Pohlman, Partner in the Labor and Employment Practice Group at Mandelbaum Barrett PC, analyzed the rule’s implications in an article published in the Dental Products Report, examining what the change could mean for dental associates and practice owners across the country.
The rule, issued by the FTC in 2024 under the Biden administration’s push to limit restrictive employment agreements, sought to ban virtually all new non-compete clauses in employment contracts and to void most existing ones. The rule represented one of the most significant proposed shifts in employment law affecting healthcare professionals in decades.
What the FTC’s Non-Compete Rule Would Have Done
Under the rule as issued, employers would have been prohibited from entering into or enforcing new non-compete agreements with workers after the rule’s effective date, with very limited exceptions. Existing non-competes for most workers would have been unenforceable once the rule took effect, and employers would have been required to notify current and former employees that their existing agreements would no longer apply.
The rule included a narrow exception for non-competes tied to the sale of a business, allowing sellers to agree not to compete with an acquirer under certain circumstances. Beyond that, the broad prohibition would have applied across virtually every industry and job classification.
For dental associates, the implications were significant. Non-compete clauses in associate employment agreements have long been a standard feature of the field, restricting departing associates from opening practices or working for competing practices within a defined geographic radius for a specified period. Had the FTC rule taken effect, it would have largely eliminated that tool for practice owners.
The Legal Challenge and Where Things Stand
Federal courts moved quickly to contest the FTC’s authority to issue the rule. A federal district court in Texas issued a nationwide injunction blocking the rule from taking effect, and subsequent court rulings ultimately vacated the rule entirely. As of now, the FTC’s broad non-compete ban has not gone into effect, and the legal landscape surrounding federal non-compete regulation remains unsettled.
State law governs non-compete enforceability in the absence of a controlling federal rule. New Jersey courts evaluate non-compete clauses under a reasonableness standard, examining geographic scope, duration, and the nature of restrictions to determine whether they are narrowly tailored to protect a legitimate business interest. An overly broad non-compete may be modified or struck down by a court rather than enforced as written.
What Dental Practices and Associates Should Consider
Regardless of the federal rule’s current status, the national conversation around non-competes has prompted many dental practices and associates to take a closer look at the terms in their employment agreements. In his Dental Products Report analysis, Brent Pohlman drew parallels to California, which has long prohibited non-compete agreements, pointing to that environment as a potential preview of what a post-ban landscape could look like in the rest of the country.
Several points are worth considering for both practice owners and associates:
- Non-compete provisions drafted years ago may not reflect current legal standards or current notions of reasonableness under New Jersey law, and reviewing them before a dispute arises is advisable.
- Associates should understand what restrictions they are accepting when signing an employment agreement, including geographic radius, duration, and the scope of prohibited activities.
- Practice owners should assess whether their non-compete language is actually enforceable under current New Jersey law, not simply whether it exists in the contract.
Non-Compete Readiness in an Uncertain Environment
The FTC’s attempt to regulate non-competes, even though it did not ultimately take effect, signals a regulatory environment in which restrictive covenants may face increasing scrutiny at both the federal and state levels. Practices that rely heavily on non-compete agreements to protect their patient base and goodwill may benefit from reviewing those agreements and considering whether alternative protections, such as non-solicitation clauses and confidentiality agreements, could serve a similar protective function.
These are not one-size-fits-all decisions. The appropriate approach depends on the specific circumstances of the practice, the associate relationship, and the jurisdiction involved.
Labor and Employment Guidance at Mandelbaum Barrett PC
Brent Pohlman and the Labor and Employment attorneys at Mandelbaum Barrett PC have handled non-compete matters on behalf of both employers and employees in the dental, medical, and broader professional sectors. The firm’s attorneys understand how New Jersey courts evaluate these agreements and can advise on drafting, reviewing, negotiating, and, if necessary, challenging or defending non-compete provisions.
To reach Mandelbaum Barrett PC’s Labor and Employment Practice Group, contact the firm through the contact page. Our attorneys are prepared to review your employment agreements and provide guidance tailored to your specific circumstances.