No More Non-Competes. Now What?

In a decision affecting all segments of animal health, from independent veterinary practices to the big pharma, the U.S. Federal Trade Commission (FTC) banned non-compete clauses from employment contracts. What could the ruling mean for your animal health business?

What does the ruling say?

The FTC’s new rule effectively bans all new non-compete clauses and makes existing ones unenforceable. Current non-compete clauses for senior executives, defined as anyone earning more than $151,164 and those in a policy-making position, are exempt, but new contracts with senior executives are included (see the rule for details).

Under this rule, employers can no longer control where employees go when they leave, whether that’s to another job or to open their own business. The FTC looked specifically at veterinary medicine; associate veterinarians were quoted several times in the ruling documents, sharing experiences of uprooting their lives and families to get beyond the radius of a non-compete restriction, or of being prevented from opening their own practices in areas that needed more veterinary care.

Will the new rule remain?

As Jim Kroman wrote in the April 26 Animal Health News and Notes Brakke Consulting Viewpoint, the balance of power between employer and employees with jobs in animal health has now moved a little closer to the middle. Or has it? In July, a federal court in Texas blocked the rule, preventing the FTC from enforcing it. As of this writing, the FTC is still determining whether to challenge the court’s ruling. The FTC can still assess and overturn non-competes on a case-by-case basis.

The path forward for animal health businesses

If the ruling comes into effect, non-compete clauses will fly the coop. Even if the rule does not come into effect, this is a clear trend in veterinary medicine and animal health. What else could animal health employers do to protect their businesses? Here are several options.

Make the right hires

Hiring the right people is now even more important. Choose your employees carefully, hiring for fit with your company’s culture and a candidate’s innate talents as much as for specific skills and experience. Look for people who will stay for the long term, contributing their energy and their animal health expertise to your business. We can help you hire the right people for the animal health jobs you need to fill.

Emphasize engagement

Employee engagement in animal health remains high, but as we showed in our 2023 Attitudinal Survey the drivers of that engagement change over an employee’s career. Use tailored strategies to help every employee connect with your business mission, whether that’s affordable care for pets or producing safe and healthy food for everyone. Give them reasons to stay, with opportunities to develop their career along paths that excite them and help your business. Find actionable suggestions in our posts on improving employee engagement and creating a meaningful workplace.

Focus on confidentiality, not competition

The FTC’s ruling would not prevent businesses from protecting trade secrets, which has long been one justification for non-compete clauses. Clearly identify your confidential information and make sure employees understand what it is and their responsibility to protect it. Non-disclosure agreements are still permitted. Practice and business owners should ask an attorney about how to identify and protect any intellectual property, trade secrets, or similar confidential information.

No cutting from the herd

Another concern when employees leave is whether other employees, or even customers, will follow. This is particularly important in the animal health industry, which places a strong emphasis on relationships. Non-solicitation agreements, designed to keep departing employees from directly approaching other employees or customers after they leave, help protect businesses against so-called ‘poaching.’  The FTC ruling would not ban non-solicitation agreements, depending on their wording. Check with a lawyer about using them to prevent departing employees from trying to take valuable staff or customers with them.

Give employees reasons to stay

Employees might not stay with your business forever, but you can give them more reasons to stay than to leave. An employee who believes in your mission, understands how their work makes a difference in the world of animal health, and sees options to develop and grow is less likely to leave. The FTC ruling wouldn’t change that at all.

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