The End of Non-Competes? The Impact It Will Have on the Healthcare Industry
Client Alert
A. Overview
On January 5, 2023, the Federal Trade Commission (“FTC”) announced a proposed rule that, if enacted, will ban employers from entering into non-compete clauses with workers (the “Rule”), and the Rule would void existing non-compete agreements. In their Notice, the FTC stated that if the Rule were to go into effect, they estimate the overall earnings of employees in the United States could increase by $250 billion to $296 billion per year.[1] The Rule would also require employers to rescind non-competes that they had already entered into with their workers.[2] For purposes of the Rule, the FTC has defined “worker” to also include any employees, interns, volunteers, and contractors.”[3]
B. Providers
This proposed Rule would have a profound effect on the healthcare industry, as many providers, such as physicians, nurse practitioners, and physician assistants have entered into non-competes with their employers, restricting them from working within a certain proximity to their previous employers, usually for a set amount of time following their employment. The rule would also rescind this restrictive covenant that many providers have already entered into with their employers.
While the rule would undoubtedly benefit providers, and even potentially patients, by not restricting where providers can practice, the rule may present difficulties to health systems, including hospitals and clinics, particularly in areas where it is a struggle to find and/or retain healthcare workers, particularly physicians.[4]
The FTC has asked the public to submit comments on the Rule, which will be due sixty (60) days after the Rule is published in the Federal Register.[5]
C. Other Employers
BMD’s employment attorney, Bryan Meek, will be publishing a new podcast episode on his YouTube channel, Employment Law After Hours, during the week of January 9th further discussing these proposed FTC rules and the possible implications on the industry.
If you have any questions regarding this proposed rule or would like to discuss submitting a public comment to the FTC regarding this proposal, please do not hesitate to contact:
- Jeana Singleton at jmsingleton@bmdllc.com or 330.253.2001
- Bryan Meek at bmeek@bmdllc.com or 330.253.5586
- Adam Fuller at adfuller@bmdllc.com or 330.374.6737
- Rachel Stermer at rcstermer@bmdllc.com or 330.253.2019
[1] Federal Trade Commission, Non-Compete Clause Rulemaking, https://www.ftc.gov/legal-library/browse/federal-register-notices/non-compete-clause-rulemaking (Jan. 5, 2023).
[2] Id.
[3] Id.
[4] Association of American Medical Colleges, “New AAMC Report Confirms Growing Physician Shortage,” https://www.aamc.org/news-insights/press-releases/new-aamc-report-confirms-growing-physician-shortage (June 26, 2020).
[5] Non-Compete Rulemaking.