By Patrick O'Brien, JD, Legal Coordinator, American Med Spa Association

Today, President Joe Biden signed an executive order (EO) that covers a number of issues and initiatives important to the administration. Notably for medical spas and medical practices, it directs the Federal Trade Commission (FTC) to take actions on anti-competitive labor practices, including employee non-compete agreements. The argument against non-competes is that they may discourage workers from seeking out higher-paying jobs in their area and make it difficult to employ their skills. Additionally, it can be difficult for lower-wage workers to get out of unenforceable non-competes, since they lack the means to seek legal recourse. The actual language of the proposed EO is not yet known and, more importantly, we do not know how the government agencies will interpret and enforce these directives. So, we currently can only speculate about how or if it will affect medical spas and the aesthetic industry.

While non-competes are somewhat common in the realm of medical spas and medical practices, they still must have limitations in order to be enforceable. A few states have adopted laws and rules that prohibit these provisions, except in very limited circumstances. Even in states that generally allow non-competes for licensed professionals, there still are limitations. Generally, the permissible goal for a non-compete is to protect trade secrets and proprietary information that would damage the business or provide an unfair advantage to the former employee. From a public policy standpoint, the clauses still need to be narrowly written to achieve that goal and not deprive the community of a trained and skilled professional. AmSpa has several resources on the current state of non-competes that may be worth reviewing to understand the current situation; see this webinar and these articles for more information.

• Non-competes, Non-solicitations, and Medical Spa Employment Contracts
• Blow Struck to Non-Solicitation Agreements in California
• Protective Covenants: Safeguarding Your Secret Sauce

It is important to note that this is an EO and not a new law. An EO cannot change existing law or give an agency more power than it currently has. An EO can, however, direct the agency to redirect their priorities or to change their interpretation of the current law. In this case, experts appear divided on whether the FTC has the power to enforce a ban on non-competes such as this. Although the FTC does have authority to act against "anti-competitive practices," which they define as unfair business practices that are likely to reduce competition and lead to higher prices, reduced quality or levels of service, or less innovation. So, it seems possible that they would have authority regarding non-competes as well.

AmSpa will be monitoring this EO and provide updates once more is known about its contents or how the agencies will take action.