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On April 23, 2024, the Federal Trade Commission (FTC) voted 3-2 on a “final rule” banning noncompetes nationwide. The premise was that banning noncompetes would lead to economic freedom through job creation, higher wages, and the expansion of the American economy of dynamism. Physicians wince at the noncompete clause in physician compensation contracts – for good reason. Noncompete clauses are restrictive and rarely favorable to physicians. The purpose of this update is not to debate the pros and cons of whether the proposed banning of noncompetes will help or hurt American healthcare or the economy. Instead, it is an outline of what the facts are today. Most importantly, it will highlight what physicians need to know and how physicians may use this FTC action as an opportunity.

The Non-Compete Ban Explained

I envision physician lounges buzzing with the news of the FTC’s final noncompete rule. I would wager that the going sentiment is that “noncompetes are officially banned!” and “we all need to demand our contracts be modified right now!”

Not so fast…let’s review what happened and the facts.

The final rule passed by the FTC is not law since only Congress can pass laws. Several bipartisan bills have been introduced to reform noncompetes, but none have been signed into law.

The final rule is already being challenged by the U.S. Chamber of Commerce, the largest pro-business lobbying group in the country. It fights for business and free enterprise interests before Congress, the White House, regulatory agencies, courts, the court of public opinion, and governments worldwide.

The FTC’s 3-2 vote suggests internal disagreement about the legality of applying the rule to non-profits. Dissenting commissioners might believe the FTC is overstepping its authority, potentially leading to legal challenges that could delay or overturn the rule’s application to hospitals.
Not surprisingly, the American Hospital Association (AHA) seeks to withdraw the proposed regulation or exempt the hospital field.

Many prominent medical practices oppose the final rule, claiming noncompetes improve patient care continuity.

The American Medical Association (AMA) voted to oppose noncompete clauses

What does the FTC’s proposed final rule do or not do?

It provides that an unfair method of competition exists and, therefore, violates section 5 of the Federal Trade Commission Act, specifically the requirement that employers enter into noncompete clauses with workers.

  • The rule takes effect 120 days after it’s published in the Federal Register (likely around August 2024).
  • It defines senior executives as workers earning more than $151,164 annually and in policy-making positions.
  • The final rule is still being determined, and it is unclear how many and which type of physicians will qualify for senior executive status and be excluded from it.
  • It does not require modification of existing noncompetes. Instead, it eliminates them.
  • The FTC doesn’t have jurisdiction over non-profit organizations, including many hospitals. Therefore, the rule’s application to these hospitals is unclear.

What should physicians do?

First and foremost, physicians should not take the final rule as a free ticket to move between employers yet. Many physicians can opt out of their noncompetes, but they may face steep buyout provisions that may not be worth the cost. Moving to a different employer does not guarantee that physicians will receive higher wages immediately.

Physicians need to stick together. They are, by nature, competitive. The best strategy for physicians may be to cooperate for mutual benefit rather than leaving their current jobs and causing marketplace disruption. Depending on the physician’s location, current noncompete clauses may cause hardship to themselves and their patients.

Lastly, physicians need to follow the latest updates carefully. The FTC’s ruling is a significant development, but it’s important to remember that it’s being challenged in court. The outcome could take some time. Our team of experts believes the ruling could be tied up in litigation for up to two years. Be careful about jumping to conclusions and get expert advice before deciding on any changes to your career.

Conclusions

Physicians may have a rare opportunity to negotiate physician compensation contracts with the FTC’s proposed final rule. Now is the perfect time to challenge physician employers.

The FTC’s action may allow physicians to leverage prospective employers to conduct physician reviews, termination reviews, amendment reviews, and renegotiations of physician contracts. For example, hospital employers who claim their noncompete clauses are non-negotiable may be forced to ease up on their restrictive stance or offer other concessions in trade.

Physicians can use the impending changes of a ban on noncompete clauses to ask for higher compensation, benefits, and better working conditions. Some physicians may be able to ask for advantages such as more favorable calls or vacation schedules – there is no harm in asking.

The FTC’s ruling on noncompetes presents a unique opportunity for physicians to negotiate better contracts and working conditions. Don’t miss out! Schedule a free consultation with Contract Diagnostics today. Our team of experts can help you review your existing agreement, understand your rights under the new ruling, and leverage this momentum to secure the compensation and career path you deserve.

About the author

Jon Appino is the Founder and CEO of Contract Diagnostics. He has spent over a decade disrupting the contract review space. He has discussed thousands of contracts with physicians and understands the challenges and opportunities of understanding how your story matters in compensation discussions. He passionately advocates for physicians and believes they deserve to be compensated fairly. He also firmly believes in the power of data and technology to improve the healthcare system.

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