Our client, an HMO, had over 300k contracts with non-compete clauses. In light of the recent FTC announcement, the entire corpus needed to have their non-completes analyzed, reviewed and organized for notification.
The Background:
In April 23, 2024, the Federal Trade Commission severely limited the practice of contractual non-compete clauses. According to the new rules, existing noncompetes will no longer be enforceable for the vast majority of workers. Existing clauses pertaining to senior executives can remain, but no new ones may be signed. In the case of our client, they were required by law to review all contracts and to notify all affected workers whether their non-competes were enforceable or not.
Our client, a large HMO, had a network of over 300,000 practitioners that had been built through a series of acquisitions. Most of the contracts contained non-complete/non-solicit clauses, which according to new FTC rules, were no longer enforceable. However, some of the contracts involved situations that qualify as exceptions. In particular, principle owners, which qualify as executives, and those involved in bona fide sales of their business. In this case, the non-solicit clauses are still valid and could still be enforced.
The Options:
Many assumed that this was a perfect job for a generative ai solution, as it can parse large volumes of information, and do so quickly. However, cost is still a factor. Our client was presented with quotes of over $500k for the job.
Our solution was more bespoke and directed. We created some custom scripting to identify and extract various data points that were important in the analysis, namely the effective date of the contact, the name and email address of the signatory and the entirety of the non-compete clause. We then used a hash algorithm to deduplicate the non-complete clauses and created a workspace to review all unique versions.
Using a contact review team, we were then able to analyze and identify the population that needed to be notified that their non-competes were still enforceable and for how much longer. Our entire solution took much less time to implement and resulted in 85% cost savings over the enterprise AI solution. It’s just another example of how technology itself isn’t always the answer. It’s experience and expertise that really matter in the end.