"Man controlling trade"

Federal Trade Commission photo

"Man Controlling Trade" is one of a pair of sculptures outside the Federal Trade Commission building in Washington, D.C.

A ban across the United States on noncompete clauses announced by the Federal Trade Commission this week has sweeping implications for employers and the workforce, including in veterinary medicine.

But the rule won't take effect until August at the earliest, and court challenges are underway, including by the U.S. Chamber of Commerce. In light of that, Dr. Lance Roasa, a veterinarian and lawyer, advises, "Wait and watch, and don't treat the ban as 'in effect' until we get word from the courts."

Noncompetes prohibit or otherwise penalize former employees from working for a competitor or establishing a rival business, typically within a defined geographic area for a specified period of time. The clauses have become increasingly common, affecting workers in businesses of all sizes, paid a wide range of incomes and across many industries.

In a 3-2 vote Tuesday approving the ban, the FTC indicated its view that noncompetes are a method of unfair competition that violates federal law. When (and if) the rule kicks in, most existing noncompetes will be unenforceable, and no new ones will be allowed. The effective date of the rule is 120 days after it is published in the Federal Register, expected shortly.

The rule makes one exception on existing noncompetes: Those applying to certain senior executives may remain in place. However, new noncompetes won't be allowed even for senior executives.

Prohibitions on employee noncompetes already exist in four states — California, Minnesota, North Dakota and Oklahoma — and several other states restrict their use. According to the FTC, the rule won't supersede state laws that don't conflict with the federal ban but will pre-empt those that do.

The federal rule does not apply to noncompete clauses that are part of a sales transaction. For example, a veterinarian or veterinary company buying a practice may still compel the seller to accept a noncompete.

While considering employee noncompetes, the FTC said it received more than 26,000 public comments, of which more than 25,000 favored a ban. The agency summarizes and addresses the comments in a 570-page document that expounds on the history and scope of the issue, discusses its implications and provides the rule itself.

To better understand how the pending rule might affect veterinarians and veterinary team members, the VIN News Service talked by email with Roasa, who has seen thousands of employment agreements in his role as a contract attorney to veterinarians over eight years. He's also analyzed and written on veterinary noncompete legal cases and teaches the law of noncompete agreements in numerous veterinary colleges. (Separately, Roasa is a co-founder of drip.vet, a continuing education business owned by the Veterinary Information Network, an online community for the profession and parent of VIN News.)

The Federal Trade Commission estimates that nearly one in five workers in the United States are under a noncompete clause. How common would you say noncompetes are in veterinary medicine?

The vast majority of veterinary employment agreements contain a noncompete clause in states that will enforce them. Not every veterinarian has a written contract, but of those that do, 95% of them contain a noncompete clause.

To clarify, is that a proportion of veterinarians in practice specifically or does it include veterinarians in other sectors, such as industry?

Noncompete agreements specifically affect veterinarians in clinical practice. It's rare to see one in industry, the public sector or other jobs within veterinary medicine. However, employment agreements for industry veterinarians usually contain extensive nondisclosure and confidentiality agreements.

How about other members of the veterinary team such as technicians — is the use of noncompetes common for their role?

It's very rare for technicians or other veterinary team members to be subject to a noncompete, but technician noncompetes do exist.

Are noncompetes used more often by large corporations than private practices or equally by both?

Equally by both. Since almost all large group practices (corporates) use written employment agreements and some private practices don't have written employment agreements, there is a greater proportion of veterinarians that work for large groups that have a noncompete in their agreement.

However, there are a couple of corporate group practices that don't have noncompete clauses in their agreements. That being said, the vast majority of both independently owned and large group practices do use noncompete clauses in their employment agreements. Keep in mind that group practices often employ highly skilled lawyers, and their noncompete provisions tend to be more carefully written and usually are more likely to be enforced.

If allowed to stand, the FTC's ban will affect almost all practicing veterinarians. Boarded specialists have some of the broadest noncompetes, so I expect massive shifts in the world of specialty care facilities.

Let's talk about situations to which the rule does not apply. As I understand it, noncompetes can still be used in buy-sell contracts and franchiser-franchisee agreements. Are there any nuances in either of those situations that folks should be aware of?

That is correct: The sellers of businesses, exiting partners and other equity owners can still be subject to noncompete clauses. State law and courts have always distinguished between sellers and employees when determining enforcement, and noncompete agreements against sellers of businesses have always been broader and more enforceable even in states that won't enforce a noncompete against employees.

Some employees, too, are not covered by the federal rule. Existing noncompetes may remain in place for senior executives, defined as workers earning more than $151,164 and serving in a "policy-making position." How do you interpret "policy-making position"?

The exception for senior executives is clearly aimed at true senior executives: CEOs, chief operating officers and the other highest positions in companies — those who have "final authority to make policy decisions that control significant aspects of a business entity," according to the definition in the rule. The explanation goes on to exclude leaders of subsidiaries of companies. This means that medical directors and regional leaders in group practices won't qualify for the exception, and thus, noncompetes won't be enforceable against them under the rule as it's currently written. However, I could see a medical director in a privately owned practice being deemed a senior executive.

How about the salary threshold? I presume that's a gross salary. The rule mentions various forms of compensation, such as commissions and nondiscretionary bonuses but doesn't address, for example, stock options or other types of ownership shares. What are your thoughts on determining whether the rule applies to someone whose compensation falls around the $150,000-a-year range?

The salary threshold is based on total compensation, which includes salary, bonuses and production pay. It does not include benefits such as health care and contributions to retirement accounts. Lawsuits and case law will be needed to fully explain the details, but I'm assuming that it will be based on W-2 wages.

There are a few categories of employers that aren't subject to the rule, as well. I'm confused whether and when the rule applies to nonprofit employers. Can you clarify that?

You have a right to be confused. There is a gray area on whether the FTC's jurisdiction applies to nonprofits. That's why you see multiple pages of explanation about nonprofits in the 570-page document released by the FTC. However, there is no straight exception for nonprofits in the rule, meaning that the new ban, on its face, would also apply to nonprofits. You can expect that portion of the rule to be challenged in lawsuits.

Since the new rule won't be enforceable for about four months — and possibly for longer, depending on the outcome of legal challenges — what is your advice for veterinarians today?


Lawsuits seeking injunctions and stays on the ban have already been filed. These lawsuits center around whether the FTC actually has the power to regulate private employment agreements. These arguments are based partially in constitutional law and partially in the Administrative Procedure Act. There is a great likelihood that the ban will not go into effect until the lawsuits are fully litigated. We can expect a lengthy appeals process and possibly even a U.S. Supreme Court case. My advice to veterinarians and practice owners is to wait and watch, and don't treat the ban as "in effect" until we get word from the courts.

So if you're a prospective employee being presented today with a noncompete clause from an employer, you can't safely figure it might not apply soon? Would you advise pushing back?

I would not advise signing a noncompete clause anticipating unenforceability under the new ban. I would advise fully negotiating the noncompete clause as if the ban was not going to be fully enforced. Associates should be negotiating the radius, the scope of practice and the time restriction to points that are reasonable and fair.

Additionally, I would encourage associates looking at employment agreements to pay close attention to the nonsolicitation clause, the nondisclosure provision and any confidentiality agreements. If drafted too broadly, these other post-employment restrictions can create similar issues as a noncompete, and they were not outright banned under the new FTC rule.

If you're an employer who uses noncompete clauses, should you continue using them until the rule is in effect?

Employers should continue to treat their noncompete agreements as enforceable until the court cases have been settled. Having said that, employers should always strive for fair and reasonable post-employment restrictions that are narrowly drafted to prohibit only unfair competition and that do not unfairly restrict former employees. Nonsolicitation agreements and confidentiality agreements are not subject to the ban unless they prohibit an employee from working elsewhere. These other post-employment restrictions can be drafted to be very fair and very capable of restricting unfair competition.

Employers should weigh their ability to hire and the job market against their need to protect their practice. Associates have long been reluctant to sign noncompete clauses, and this rule will certainly add to that resistance. If an employer does feel the need to use a noncompete clause, it should be drafted in a narrow fashion, without creating undue burden on the employee.

The FTC rule requires that employers notify employees subject to noncompetes that they will be unenforceable.

Would you advise employers to wait until the rule is in effect before worrying about giving this notice, or prepare now?

Preparing now is always better than scrambling later. This is a good time for employers to evaluate their post-employment restrictions, how they protect their practice and what their associates think about those contractual agreements. This would be a good opportunity for employers to have a conversation with their associates about the need to protect the practice from unfair competition and what are reasonable and acceptable methods for both the practice and associates.

This rule will certainly start conversations between employers and employees. However, I would not assume that the ban will take effect until the legal challenges are complete.

As far as preparation, the FTC has posted sample notices that employers can use in the form of letters to notify employees. [See page 566 of the pdf hyperlinked in the introduction.]

What are the consequences for employers who break the rule?

There are not penalties or fines. The rule simply states that noncompete agreements are "unfair methods of competition" and not enforceable against workers.

The FTC predicts that eliminating noncompetes will raise wages overall because employees will be freer to change jobs, a well-known route to better pay. Do you anticipate this to be true in veterinary medicine?

That is what the FTC asserts in their reasoning for the ban; however, the empirical economic and financial evidence is mixed. There is evidence that a ban on noncompete agreements positively affects salaries for low wage earners, but for high wage earners and professionals, there is not conclusive evidence. So, I'm not sure what to anticipate in veterinary medicine. The good news is that veterinary salaries are increasing drastically even without a ban.

Can you foresee any unintended negative consequences for employees? For example, might the rule increase the risk of practice ownership such that salaries actually are reduced, or might it ultimately reduce the number of smaller independent practices?

Large corporate practices have access to highly skilled attorneys that are up-to-date on regulatory changes such as the FTC's ban. I expect private equity attorneys to carefully draft nonsolicitation agreements and other post-employment restrictions to protect their client's practices. Smaller independently owned practices are less likely to have access to attorneys that can and will work to evaluate their post-employment restrictions, so they will be at a disadvantage. Having said that, all employers should be preparing for a conversation and potentially a negotiation with associates about post-employment restrictions and, arguably, small employers should be better poised to have that one-on-one conversation.

Some practice owners say they use noncompete clauses to avoid their clients being poached by employees who leave to set up their own practices. Are there means other than a noncompete to prevent that from happening?

Yes, nonsolicitation agreements can be very narrowly drafted and still protect employers from unfair competition if a former employee chooses to use confidential or proprietary information to unfairly solicit clients. There are also state law protections that create a duty of loyalty from employee to employer, where an employee cannot use proprietary information against the employer.

This is a good opportunity for veterinary employers to identify which information could be used in an unfair manner against the practice and review their policies naming and protecting proprietary and confidential information.

A presidential election is coming up in November. Should there be a change in administration next year, could the rule easily be rescinded?

Whether the rule is allowed to proceed, blocked or rescinded, it has and will drastically change the employment landscape in veterinary medicine just by starting the conversation. The fact we are having this discussion highlights the presence of noncompete agreements and the issues they can cause for employees. Prospective employees are much more likely to be wary of the noncompete and more likely to negotiate. Current employees are more likely to push for changes to existing contracts. Said another way, the cat is out of the bag regarding noncompete agreements. Thus, I expect continued changes, regardless of the end result of the ban.

As far as a rescission, FTC commissioners serve seven-year terms, not "at the whim of the President." The FTC is supposed to be a nonpolitical agency, and four of the commissioners cannot be from the same political party. A different administration will have the opportunity to appoint one new commissioner in 2025. So, an about-face by the FTC will be unlikely. Congress could vote to intervene or overrule, although, again, it's unlikely.

Any other aspects you'd like to address?

In my teaching, I emphasize reading, understanding and negotiating the entire employment agreement, including the post-employment restrictions. These agreements are worth hundreds of thousands of dollars and years of your life. They are worth paying attention to and getting professional help to understand them. A local contract attorney with close knowledge of the veterinary profession is needed in most situations. The American Veterinary Medical Law Association provides a directory of its members.

Even if noncompete agreements are banned, associates still should closely review other post-employment restrictions, so don't let your guard down based on this rule.