Can Associate Dentists Throw Away Non-Compete Contracts?

As many of you are aware, the Federal Trade Commission issued its final rule on April 23, 2024, banning the use of non-compete agreements. Dentists worry that their employment agreements with associate dentists may not hold up. As a result, an associate could potentially open a nearby practice within minutes and draw patients away from their former employer. How should we react to this ban on Non-Compete Contracts

Implementation Timeline and Legal Challenges

First, the non-compete ban does not go into effect until 120 days after publication in the Federal Register. The U.S. Chamber of Commerce has not wasted time in filing a lawsuit challenging this ban. In the meantime, dental practices should take steps to understand what will take place should the new law survive being challenged.

Key Provisions of the New Rule

• Ban on New Non-Compete Agreements
  It appears that all new non-compete agreements are banned. Review existing employment agreements and consult with legal counsel about revising the language in agreements that are being utilized.
• Exemptions for Seller Dentists
  This new law does not, however, apply to non-compete agreements for a seller dentist who is selling substantially all of the dental practice’s operating assets.
• Impact on Existing Non-Compete Agreements
  Non-compete agreements already in place will no longer be enforceable once the new law is in effect. Dentists who have non-competes in place must notify their associates that by the effective date, non-compete clauses will not be enforced.

Steps to Take Immediately

• What Should You Do Right Now?
  Take a deep breath. The new rule does not go into effect until late August or early September. This gives you time to prepare and consult counsel.
• Renegotiation of Employment Agreements
  If you are in negotiations with an associate dentist, you may want to replace the non-compete language with simply a fixed-duration employment contract.
• Protection of Patient Information
  Make certain that no PHI is in the possession of the associate dentist who is leaving your practice. This includes lists of patients.

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