FTC bans noncompete clauses

[DarkBluMage]

Any thoughts on this? I personally am excited for this because the thought of someone telling me I essentially can’t work in my home city or elsewhere because I left their employment is disgusting to me. I’m glad it’s happening before I graduate and finish residency since that will give time for litigation to sort all this out. I’m interested to see if there will be some pushback from hospitals pretending to be non-profits, but who may not want a closer look from the FTC. https://www.wsj.com/politics/policy...trict-job-switching-984d2187?mod=breakingnews

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[Mr.Smile12]

Chamber of Commerce has opposed this rule, and I expect they will sue. But yes, it's a big deal.

Here's the statement from the American Hospital Association.

FTC issues final rule banning most noncompete clauses in employer agreements | AHA News

The Federal Trade Commission April 23 voted 3-2 to issue a final rule that would ban as an unfair method of competition contractual terms that prohibit workers from pursuing certain employment after their contract with an employer ends.

www.aha.org

 

[LucidSplash]

I would not get excited yet. First there’s going to be a lot of lawsuits to try to prevent this. The Chamber of Commerce filed today.

Second, the FTC doesn’t have jurisdiction over not for profit and non-profit entities. Though they think this may still apply to some hospitals, but that is also going to try to take time to work out. I suspect even if the rule is implemented eventually, will take even longer to figure out if it will apply to most if any docs and in what situations.

 

[coconutlover]

Chamber of Commerce has opposed this rule, and I expect they will sue. But yes, it's a big deal.

Here's the statement from the American Hospital Association.

FTC issues final rule banning most noncompete clauses in employer agreements | AHA News

The Federal Trade Commission April 23 voted 3-2 to issue a final rule that would ban as an unfair method of competition contractual terms that prohibit workers from pursuing certain employment after their contract with an employer ends.

www.aha.org

Next step, unban physician owned hospitals

 

[DarkBluMage]

Chamber of Commerce has opposed this rule, and I expect they will sue. But yes, it's a big deal.

Here's the statement from the American Hospital Association.

FTC issues final rule banning most noncompete clauses in employer agreements | AHA News

The Federal Trade Commission April 23 voted 3-2 to issue a final rule that would ban as an unfair method of competition contractual terms that prohibit workers from pursuing certain employment after their contract with an employer ends.

www.aha.org

I started reading their response to why non-competes shouldn’t be banned and it immediately made me angry. Forcing doctors to remain in their employ or be banned from an area only exacerbates physician shortages in areas, not help it. AHA is on crack. It’s an obvious attempt to grasp at keeping doctors in a subservient role and unable to barter for financial/workplace freedom to serve their interests. It’s disgusting.

 

[DarkBluMage]

I

I would not get excited yet. First there’s going to be a lot of lawsuits to try to prevent this. The Chamber of Commerce filed today.

Second, the FTC doesn’t have jurisdiction over not for profit and non-profit entities. Though they think this may still apply to some hospitals, but that is also going to try to take time to work out. I suspect even if the rule is implemented eventually, will take even longer to figure out if it will apply to most if any docs and in what situations.

I’m looking forward to seeing how litigation plays out. Doctors shouldn’t be held subservient to corporate run hospitals and have their lives/goals upended because they’re not interested in being financially controlled or treated like the average cog in the wheel.

 

[LucidSplash]

I

I’m looking forward to seeing how litigation plays out. Doctors shouldn’t be held subservient to corporate run hospitals and have their lives/goals upended because they’re not interested in being financially controlled or treated like the average cog in the wheel.

I don’t disagree with you.

But I also think there’s a pretty good chance that this rule will only make it though litigation with significant limitations and I suspect this will include excluding most doctors. The rule already excludes “senior executives with salaries >$151,154 involved in policy-making” and I can easily see how that will be construed to include most employed doctors.

So while I understand your enthusiasm, I would counsel patience. I suspect this will take a couple to a few years to work its way through the courts including appeals and ultimately Supreme Court which is where I think this will end up. And I don’t think a conservative court is likely to side with labor over business.

 

[Wamuu]

I started reading their response to why non-competes shouldn’t be banned and it immediately made me angry. Forcing doctors to remain in their employ or be banned from an area only exacerbates physician shortages in areas, not help it. AHA is on crack. It’s an obvious attempt to grasp at keeping doctors in a subservient role and unable to barter for financial/workplace freedom to serve their interests. It’s disgusting.

It's because they know that it will reduce healthcare costs and force them to actually pay doctors well... especially those in primary care/pediatrics.

 

[DarkBluMage]

It's because they know that it will reduce healthcare costs and force them to actually pay doctors well... especially those in primary care/pediatrics.

Yea to keep non-competes is to basically say you're okay with physicians being treated as if they're worthless. The healthcare system falls apart without doctors and doctors deserve to be paid well for the sacrifice it takes for them to reach the education level of an attending. Nickel and diming and essentially creating modern indentured servants of people you need to effectively care for patients, while they're in 6 figure debt is crazy to me. I'm not sure how non-competes were ever allowed or made legal.

 

[DarkBluMage]

It's because they know that it will reduce healthcare costs and force them to actually pay doctors well... especially those in primary care/pediatrics.

Pediatrics should be paid way better than it currently is, no one cares about kids though.

 

[DarkBluMage]

I don’t disagree with you.

But I also think there’s a pretty good chance that this rule will only make it though litigation with significant limitations and I suspect this will include excluding most doctors. The rule already excludes “senior executives with salaries >$151,154 involved in policy-making” and I can easily see how that will be construed to include most employed doctors.

So while I understand your enthusiasm, I would counsel patience. I suspect this will take a couple to a few years to work its way through the courts including appeals and ultimately Supreme Court which is where I think this will end up. And I don’t think a conservative court is likely to side with labor over business.

All of our professional organizations that represent physicians really need to band together and make their voices heard over this issue. It's definitely the time to fight while this has light shed on it.

 

[Wamuu]

Pediatrics should be paid way better than it currently is, no one cares about kids though.

I agree. 180k for what they do is peanuts. There are CRNAs making more for less work and more hubris.

 

[Wamuu]

Home - Physicians for Patient Protection

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www.physiciansforpatientprotection.org

 

[RangerBob]

I agree with the premise of banning non-competed (which are thankfully unenforceable here in CA already).

But look at it from the business standpoint (whether MBA-run hospital or physician-owned practice). They put a LOT of time and effort into recruiting docs, training them, providing support for them, bringing in patients for them. All of which is multiplied by 5 if it’s a new grad—they take a while to get up to speed and see patients at full capacity. And patients are very loyal to their physicians—if their doc leaves, they would follow them there. That’s a lot of money the business then loses. Granted, these days patients are starting to be more local to the healthcare system (Kaiser, Swedish, etc.) than the doc themselves, which is an unfortunate but predictable consequence of removing docs from power/control of hospitals/clinics and putting businessmen/women in charge and encouraging more and more consolidation.

Still, part of why Silicon Valley became Silicon Valley is non-competes weren’t enforceable here (but they were in Boston, etc), which increased competitiveness and dissemination of new thought/ideas since companies kept poaching each others’ employees. While I understand where the business is coming from, they should have to work to keep a desirable doc. If companies in CA can make it work without being able to enforce a non-compete, others can too.

 

[Smurfette]

I have a non-compete and live in a state where it's enforceable. The main issue with them here is that basically there are a handful of healthcare systems employing virtually all the physicians with only a few exceptions, and they all refer within their own systems. They all track referrals going out of system and discourage that from happening. I'm a specialist so I rely on referrals; if I were to change health care systems there would be some patients who might follow me or seek me out but mostly the PCPs will refer to someone else and I will have to rely on my new system's PCPs to refer me patients instead. So really, the non-compete is just to prevent me from leaving and doesn't really prevent loss of customers (patients) as the system already stacked the deck.

 

[Obnoxious Dad]

The basic legal question here is whether the Federal Trade Commission has the authority to promulgate a rule of this magnitude. I can't recall an instance when the FTC invalidated a longstanding and widespread employment practice. I hope the FTC has that authority. Non-compete agreements drive an economic wedge between the people who provide care and the people who ultimately pay for care. These agreements are the life blood of private equity in medicine.

I want to see non-compete agreements die everywhere. They are a scourge from public accounting to submarine sandwich shops. The sooner they go, the better. One of the great ironies here is that lawyers, who draft these agreements and attempt to enforce them, can't be subjected to non-compete agreements. One more reason to despise lawyers. When I practiced law, I loathed about 50% of my "colleagues".

I agree with the premise of banning non-competed (which are thankfully unenforceable here in CA already).

But look at it from the business standpoint (whether MBA-run hospital or physician-owned practice). They put a LOT of time and effort into recruiting docs, training them, providing support for them, bringing in patients for them. All of which is multiplied by 5 if it’s a new grad—they take a while to get up to speed and see patients at full capacity. And patients are very loyal to their physicians—if their doc leaves, they would follow them there. That’s a lot of money the business then loses. Granted, these days patients are starting to be more local to the healthcare system (Kaiser, Swedish, etc.) than the doc themselves, which is an unfortunate but predictable consequence of removing docs from power/control of hospitals/clinics and putting businessmen/women in charge and encouraging more and more consolidation.

Oh, puhleeze. The people who put in the time and effort are the professionals who spent up to eight years in college and medical school plus another three to 10 years as an indentured servant in residency and fellowship.

 

[Dragonite7]

FTC already clarified they *exclusively* mean c-suite positions where compensation may be complex and elements of compensation are actively negotiated with non-competes being used as a counterweight. Without that high level negotiation, there is no exception. So just c-suite people, not directorship. Also, fun fact - it does NOT exempt high level senior roles, it is that it won't retroactively invalidate it for those people. Everyone else is retroactively invalidated. Nobody can have non-competes going forward in the future.


FTC already said this argument is nonsense and they specifically addressed this in their ruling that they feel hospitals, including non-profit hospitals, are one of the clearest places where this will see a benefit. They have some legalese argument that even if non-profit institutions are not directly audited by the FTC through their narrow direct oversight powers doesn't mean that they aren't under the greater purview of the FTC to regulate commerce as a whole.

Ironically both of these questions were asked by Jake Tapper two days ago and answered by the FTC chairwoman (and the second one is specifically written in the FTC's statement on this).

I thought DocEspana's post in the EM boards was helpful for clarifying who this applies to. At least for now, it seems like the FTC is clear about its ruling applying to doctors.

 

[RangerBob]

Oh, puhleeze. The people who put in the time and effort are the professionals who spent up to eight years in college and medical school plus another three to 10 years as an indentured servant in residency and fellowship.

If you read my post I said I don't agree with non-competes and that clearly we can function without them (and the system can thrive). I was just pointing out the employer's side and why they're going to fight to keep them.

 

[DocEspana]

I don’t disagree with you.

But I also think there’s a pretty good chance that this rule will only make it though litigation with significant limitations and I suspect this will include excluding most doctors. The rule already excludes “senior executives with salaries >$151,154 involved in policy-making” and I can easily see how that will be construed to include most employed doctors.

So while I understand your enthusiasm, I would counsel patience. I suspect this will take a couple to a few years to work its way through the courts including appeals and ultimately Supreme Court which is where I think this will end up. And I don’t think a conservative court is likely to side with labor over business.

Someone else quoted me and dragged me into this conversation, so let me respond to this. The FTC specifically said that one of the communities they were trying to make sure that this does target is doctors. Also the rule doesn't exclude anyone. Once it goes into effect all new non-competes are barred. Its senior executives (read as: c-suite) who will not have their non-competes retroactively invalidated. That level of nuance is important here, this is a massive and sweeping decision. The only reason that executives are excluded from the retroactive invalidation is that their compensation packages are heavily negotiated and complex things and often the company would not agree to them if the noncompete wasn't there so they (the ftc) doesnt want to screw with negotiations on compensation that already happened. But everyone else with a noncompete is felt to be a predatory clause that they are retroactively invalidating and in the future no one (including no c-suite members) can have noncompetes.

This is directly from the full FTC statement that was released in pritnt form and from statements of the FTC chair woman during a recent CNN interview on this.

 

[Dragonite7]

Sorry, I didn't mean to drag you in. I just appreciated your comment since I hadn't seen anyone else mention those details.

 

[Obnoxious Dad]

If you read my post I said I don't agree with non-competes and that clearly we can function without them (and the system can thrive). I was just pointing out the employer's side and why they're going to fight to keep them.

I read your post. Your "employer's side" is the usual song and dance that's been used to justify non-compete clauses in every field.

 

[LucidSplash]

Someone else quoted me and dragged me into this conversation, so let me respond to this. The FTC specifically said that one of the communities they were trying to make sure that this does target is doctors. Also the rule doesn't exclude anyone. Once it goes into effect all new non-competes are barred. Its senior executives (read as: c-suite) who will not have their non-competes retroactively invalidated. That level of nuance is important here, this is a massive and sweeping decision. The only reason that executives are excluded from the retroactive invalidation is that their compensation packages are heavily negotiated and complex things and often the company would not agree to them if the noncompete wasn't there so they (the ftc) doesnt want to screw with negotiations on compensation that already happened. But everyone else with a noncompete is felt to be a predatory clause that they are retroactively invalidating and in the future no one (including no c-suite members) can have noncompetes.

This is directly from the full FTC statement that was released in pritnt form and from statements of the FTC chair woman during a recent CNN interview on this.

I see what you are saying but it does exclude non-profit and not for profits which the FTC has no jurisdiction over. I did see where the FTC said they thought they would have some jurisdiction over some hospitals despite not for profit/non profit status due to having relationships with for profit entities but I still stand by what I said as I think this is a theory only at this point and yet to be feted by the legal system. I would not get too excited. I think this is going to take awhile (year to years) to work through the courts and I suspect that it will not look the same at the end as I doubt a conservative court will side with labor over business.

I still council caution and I would still advise anyone to be cautious about what they sign and not just disregard noncompetes as they are probably going to still be a factor in the near term.

 

[RangerBob]

I read your post. Your "employer's side" is the usual song and dance that's been used to justify non-compete clauses in every field.

Yes.

Hence why they will push to delay/overturn the FTC ruling.

Again, I’m not defending them. I was pointing out that employers have a real/vested interest in preserving non-competes. Even when systems (such as CA) show things can go quite well/better for all without them.

 

[LucidSplash]

Yes.

Hence why they will push to delay/overturn the FTC ruling.

Again, I’m not defending them. I was pointing out that employers have a real/vested interest in preserving non-competes. Even when systems (such as CA) show things can go quite well/better for all without them.

I don’t think anyone disputes that employers and corporations have a vested interest in non-competes or disputes that they have the perspective you posted in your initial post on the subject. In fact it was kinda an obvious recounting of the business perspective. It DID come across as kinda a “but let me business-splain to you why these are important” in a way that seemed pro-business. I don’t think anyone here need to you explain why businesses are pro-non-compete, so it came across as being a pro-business post. 🤷🏼‍♀️

 

[RangerBob]

I don’t think anyone disputes that employers and corporations have a vested interest in non-competes or disputes that they have the perspective you posted in your initial post on the subject. In fact it was kinda an obvious recounting of the business perspective. It DID come across as kinda a “but let me business-splain to you why these are important” in a way that seemed pro-business. I don’t think anyone here need to you explain why businesses are pro-non-compete, so it came across as being a pro-business post. 🤷🏼‍♀️

Ah. Not what I meant. I was trying to make sure both sides were understood.

I try that with my wife as well but it doesn't always go the way I planned. Sometimes we've argued about things when we're both on the same page, lol. I just like to point out the alternates side's point of view.

 

[LucidSplash]

Ah. Not what I meant. I was trying to make sure both sides were understood.

I try that with my wife as well but it doesn't always go the way I planned. Sometimes we've argued about things when we're both on the same page, lol. I just like to point out the alternates side's point of view.

This is generally what is meant by the term mansplaining. But anyone can do it. Most people don’t need another person to explain alternate view points “just so you understand what they are”, and if they do they will ask you to do so. It is unnecessary explaining.

 

[RangerBob]

This is generally what is meant by the term mansplaining. But anyone can do it. Most people don’t need another person to explain alternate view points “just so you understand what they are”, and if they do they will ask you to do so. It is unnecessary explaining.

I only saw one sided arguments here, so it wasn’t clear all the contributors understood the other side and why that side is going to fight so hard to keep noncompetes.

 

[DocEspana]

I see what you are saying but it does exclude non-profit and not for profits which the FTC has no jurisdiction over. I did see where the FTC said they thought they would have some jurisdiction over some hospitals despite not for profit/non profit status due to having relationships with for profit entities but I still stand by what I said as I think this is a theory only at this point and yet to be feted by the legal system. I would not get too excited. I think this is going to take awhile (year to years) to work through the courts and I suspect that it will not look the same at the end as I doubt a conservative court will side with labor over business.

I still council caution and I would still advise anyone to be cautious about what they sign and not just disregard noncompetes as they are probably going to still be a factor in the near term.

this part is completely wrong. The FTC has *extensive* control over non-profit entities and has repeatedly proven so by past actions and policies that have stood for decades. Their website has multiple pages of policies specific to the control they have over non-profits that wish to interact with the job market as a whole (exactly the argument they use for this policy as well). This isn't a novel critique leveled at the FTC and they've shot it down in writing and in action many times before without it being overturned. What they don't have is direct audit power, but that's not necessary since this isnt about directly managing not for profit day to day business, but rather about the job market as a whole. So their comment they released is, in more polite language, reminding the naysayers that their argument is squirrely and trying to find a technicality that doesn't apply here, while their power over non-profits as 'a part of a policy applied to the whole market' is exceptionally well established.

Arguing that others show restraint and realise this isn't a closed deal? That's valid.

 

[DarkBluMage]

I only saw one sided arguments here, so it wasn’t clear all the contributors understood the other side and why that side is going to fight so hard to keep noncompetes.

I understood their reasons, they’re just bs reasons and don’t hold water.

 

[RangerBob]

I understood their reasons, they’re just bs reasons and don’t hold water.

Well, to the c-suite folks they hold water.

But I agree their reasons are pointless. Part of what makes a society thrive is diversity of thought and idea exchange. Non-competes negate that.

Much of what the business truly values could be handled better with different and less restrictive clauses. And some things that the business is trying to prevent aren't ethical to begin with (tying a doc to a specific health system if they want to stay in the same city/region, preventing patients from following their doc to a different system, etc.)

 

[Putkernerinthehall]

I only saw one sided arguments here, so it wasn’t clear all the contributors understood the other side and why that side is going to fight so hard to keep noncompetes.

For what it's worth, I read your original post exactly as you intended. Not in support, but understanding the other side's motives. You have to understand the guy on the other side of the table. Not everyone reading this forum has the same level of background on the subject.

 

[DarkBluMage]

For what it's worth, I read your original post exactly as you intended. Not in support, but understanding the other side's motives. You have to understand the guy on the other side of the table. Not everyone reading this forum has the same level of background on the subject.

Not sure why anyone would assume no one understands the other sides motives.

 

[LucidSplash]

The FTC’s noncompete rule is a concerning development for physicians

The ruling is going to be difficult to interpret and enforce.

www.medicaleconomics.com

 

[Obnoxious Dad]

As much as I loathe non-compete agreements and support the substance of the FTC's decision, after a little research I am now pessimistic that this decision will withstand legal challenges. It boils down to the "Major Questions Doctrine". The people challenging the decision will argue that Congress never intended to give the FTC authority to make such a broad and significant rule and that it would be up to Congress itself to ban non-compete agreements across the board. See this from Wikipedia:

Major questions doctrine - Wikipedia

en.wikipedia.org

For those of you who wanted to go to law school, but just couldn't wedge it in here's a 52 page article hot off the press from the Ohio State Law Review: https://moritzlaw.osu.edu/sites/def...Capozzi_v84-2_191-242 2023-06-02 18_51_09.pdf

 

[esob]

I hope they can make it stick.

 

[DarkBluMage]

I hope they can make it stick.

Me too

 

[LucidSplash]

this part is completely wrong. The FTC has *extensive* control over non-profit entities and has repeatedly proven so by past actions and policies that have stood for decades. Their website has multiple pages of policies specific to the control they have over non-profits that wish to interact with the job market as a whole (exactly the argument they use for this policy as well). This isn't a novel critique leveled at the FTC and they've shot it down in writing and in action many times before without it being overturned. What they don't have is direct audit power, but that's not necessary since this isnt about directly managing not for profit day to day business, but rather about the job market as a whole. So their comment they released is, in more polite language, reminding the naysayers that their argument is squirrely and trying to find a technicality that doesn't apply here, while their power over non-profits as 'a part of a policy applied to the whole market' is exceptionally well established.

Arguing that others show restraint and realise this isn't a closed deal? That's valid.

Well, I’m no lawyer but every lawyer analysis I have read states that the FTC has jurisdiction only over sham charities and non-profits that provide economic benefits for members. There is an argument that many hospitals fall under the latter category as they self-refer and generate profits that way.

But I think that’s something else entirely apart from claiming that the FTC has “extensive control over non-profit entities.” The pages of interactions you cite all look like sham charities to me.

But in the end I can expect this is exactly the point around which litigation on the subject will revolve. Will be academically interesting to those of us with an interest in this sort of thing from a business perspective, and of course materially interesting to all of us who are not in private practice, but also to those in private practice who are affected by hospital systems buying up practices and/or pushing out the private practices by creating their own separate departments and diverting revenue streams from previously successful and cooperative private community partners.

 

[operaman]

As someone who thankfully doesn’t have a noncompete now, there are definitely other ways an employer can make it harder to leave. Mine does that by temporarily restricting my ability to recruit and hire any staff that also work them.

Effectively this substantially raises the cost and hassle of going solo or forming a private group practice with some other docs. Staffing around here is incredibly challenging so this would be a huge barrier.

Way better than a true noncompete, but just a small example how employers will try to find ways around it.

 

[Smurfette]

As someone who thankfully doesn’t have a noncompete now, there are definitely other ways an employer can make it harder to leave. Mine does that by temporarily restricting my ability to recruit and hire any staff that also work them.

Effectively this substantially raises the cost and hassle of going solo or forming a private group practice with some other docs. Staffing around here is incredibly challenging so this would be a huge barrier.

Way better than a true noncompete, but just a small example how employers will try to find ways around it.

Every physician non-compete I've ever heard of also bans you from recruiting other employees to follow you, or disclosing to patients where you are going.
However, it doesn't ban other people from telling patients where you are going...

 

[SurfingDoctor]

Your employer doesn't care...