The Evolving Landscape of Non-Compete Clauses: What Dental Professionals Need to Know

Non-compete clauses have long been a contentious topic in employment contracts, especially in the dental industry. These clauses, which restrict where and how a professional can work after leaving a practice, are often a source of anxiety for associate dentists and specialists. Recent legal developments, however, have brought non-compete agreements into the spotlight, creating uncertainty about their enforceability and future.

As someone who has spent over 25 years working in and with dental practices, I’ve seen how non-compete clauses can impact career mobility and practice stability. With the Federal Trade Commission’s (FTC) recent attempt to ban non-competes nationwide and the subsequent legal challenges, it’s more important than ever for dental professionals to stay informed. Here’s what you need to know about the current state of non-compete clauses and how to navigate them in your contracts.

1. The FTC’s Attempt to Ban Non-Competes: What Happened?

In April 2024, the FTC issued a Final Rule that would have banned almost all non-compete clauses nationwide, retroactively invalidating millions of existing agreements. However, on August 20, 2024, a Texas court set aside the Final Rule in Ryan LLC v. FTC, ruling that the FTC exceeded its authority under the Federal Trade Commission Act (FTCA).

Judge Ada Brown’s decision not only barred the FTC from enforcing the rule but also raised questions about the agency’s ability to regulate non-competes through broad rulemaking. The court found the rule to be arbitrary and capricious, citing insufficient evidence to justify a categorical ban and a failure to consider less restrictive alternatives.

While the FTC has the option to appeal the decision, the Final Rule is currently unenforceable. This means non-compete clauses remain governed by state laws, which vary widely in their enforceability and scope.

2. What Does This Mean for Dental Professionals?

For now, non-compete clauses are still enforceable in many states, but the legal landscape is shifting. Here’s what dental professionals should keep in mind:

• State Laws Take Precedence: States like California, Minnesota, Oklahoma, and North Dakota already prohibit non-compete agreements, while others, such as Illinois and Massachusetts, impose significant restrictions. It’s crucial to understand the laws in your state before signing a contract.
• Future Federal Legislation: Bipartisan support for limiting non-competes is growing in Congress. The “Workforce Mobility Act,” which would largely ban non-compete agreements nationwide, has been introduced multiple times and may gain traction in the coming years.
• Employer Adaptations: Many employers are shifting their focus to other restrictive covenants, such as non-solicitation and non-disclosure agreements, to protect their business interests.

3. How to Navigate Non-Compete Clauses in Your Contract

Non-compete clauses can significantly impact your career mobility, so it’s essential to approach them with caution. Here are some tips to help you navigate these agreements:

• Understand the Scope: Pay close attention to the geographic radius, duration, and scope of the non-compete clause. Is it reasonable and enforceable under your state’s laws? For example, a clause that prevents you from working within a 50-mile radius for five years may be excessive and subject to legal challenge.
• Negotiate Narrower Terms: If a non-compete clause is included in your contract, try to negotiate terms that are less restrictive. For instance, you could request a shorter duration or a smaller geographic area.
• Seek Legal Advice: A dental-specific attorney can help you evaluate the enforceability of a non-compete clause and negotiate more favorable terms.

4. Alternatives to Non-Compete Clauses

As the legal landscape around non-competes evolves, employers are increasingly relying on other restrictive covenants to protect their interests. These include:

• Non-Solicitation Agreements: These clauses prevent you from soliciting patients or staff from the practice after you leave.
• Non-Disclosure Agreements (NDAs): NDAs protect confidential information, such as patient records and business strategies, from being shared with competitors.

These alternatives are often less restrictive than non-compete clauses and may provide a more balanced approach to protecting both the employer’s and employee’s interests.

5. The Future of Non-Competes: What to Expect

While the FTC’s attempt to ban non-competes has been blocked for now, the issue is far from settled. Here’s what we can expect moving forward:

• State-Level Changes: Many states are introducing legislation to limit or ban non-compete clauses. For example, recent laws in New York, Rhode Island, and Illinois have narrowed the scope of enforceable non-competes.
• Increased Scrutiny: Courts are becoming more critical of overly broad non-compete clauses, often ruling them unenforceable. Employers will need to draft these agreements carefully to withstand legal challenges.
• Federal Action: Even if the FTC’s Final Rule remains unenforceable, bipartisan support for limiting non-competes could lead to federal legislation in the near future.

Final Thoughts

Non-compete clauses are a complex and evolving area of employment law, and their impact on dental professionals cannot be overstated. As the legal landscape continues to shift, it’s essential to stay informed and proactive.

At Your Dental Recruiter, I’m committed to helping dental professionals navigate these challenges with confidence. Whether you’re reviewing a contract, negotiating terms, or planning your next career move, I’m here to provide the guidance and support you need.

Remember, your career is your most valuable asset. Don’t let a restrictive non-compete clause hold you back from achieving your goals.

Melissa Cleary Owner and Founder, Your Dental Recruiter