Eliminating Non-Compete Clauses from Employment Contracts
The Federal Trade Commission recently proposed a new rule that would prohibit employers from including noncompete clauses in employment agreements and enforcing those that currently exist. The rule is based on a preliminary finding that noncompete agreements create an unfair method of competition, which violates section 5 of the Federal Trade Commission Act. The FTC estimates that approximately 18% of American workers are affected by noncompete agreements.
Noncompete clauses, also known as restrictive covenants, are unfortunately common in healthcare. Stemming from the days when most medical practices were small and privately owned, they were utilized to discourage employed physicians from leaving a practice and opening their own office nearby. Likewise, many PAs and NPs have been subject to noncompete clauses in their employment contracts, preventing them from leaving a practice to go to another where patients may follow.
There are already several states that deem noncompete clauses unenforceable, while most states allow and enforce them, depending on the job type, scope, distance, and other factors. In those states where they can be enforced, it is rare for an employee to have the resources to pursue litigation--so they end up leaving the community entirely out of necessity. Healthcare providers leaving a community is a huge disservice to patients where access to healthcare is already an struggle.
Noncompete agreements can reduce turnover, but is it in the best interests of patients to have a provider caring for them who is truly dissatisfied with their employment? Whether employing physicians, PAs, or NPs, one can argue that the best way to maintain practice loyalty is to create a supportive work environment rather than one in which they are legally bound. Not only will there be less turnover, but patients receive the best care from a provider who feels well supported, appreciated, and focused on patient care.
The proposed rule, if adopted by the Federal Trade Commission, will prove useful for those in various professions who find themselves in less-than-desirable employment agreements.
The FTC is currently seeking public comment on the proposed rule through March 20, 2023 via the following link:
https://www.regulations.gov/document/FTC-2023-0007-0001
References
Federal Trade Commission. (2023, January 5). FTC proposes rule to ban noncompete clauses, which hurt workers and harm competition (Press release). https://www.ftc.gov/news-events/news/press-releases/2023/01/ftc-proposes-rule-ban-noncompete-clauses-which-hurt-workers-harm-competition
Smith, E. (2021). Ending physician noncompete agreements-time for a national solution. JAMA Health forum, 2(12), e214018. https://jamanetwork.com/journals/jama-health-forum/fullarticle/2786894
Jennifer Conner, MPAS, PA-C resides near Indianapolis, IN where she practices at Dawes Fretzin Dermatology.