Healthcare noncompetes are common for physicians, preventing them from working for a nearby competitor for a specific amount of time after they leave a practice.
Doctors and other healthcare workers who work under noncompete clauses would be freed of those hiring restrictions under a new rule proposed by the Federal Trade Commission (FTC).
The proposal would ban employers across healthcare and all industries from forcing noncompetes on their employees—“a widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses,” according to a press release from the FTC.
Employers frequently use their bargaining power to compel employees across industries and job levels—from warehouse workers to healthcare executives—into signing noncompete contracts, blocking them from pursuing better opportunities, according to the FTC.
Healthcare noncompetes are common for physicians, preventing them from working for a nearby competitor for a specific amount of time after they leave a practice.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy,” said Lina M. Khan, FTC chair.
“Noncompetes block workers from freely switching jobs, depriving them of higher wages and better working conditions, and depriving businesses of a talent pool that they need to build and expand,” she said. “By ending this practice, the FTC’s proposed rule would promote greater dynamism, innovation, and healthy competition.”
Noncompete clauses also hinder innovation and business potential by preventing entrepreneurs from forming competing businesses and inhibiting workers from bringing innovative ideas to new companies, according to the FTC.
This ultimately harms consumers because in markets with fewer new entrants and greater concentration—such as the healthcare sector—consumers can face higher prices.
The FTC’s proposed rule would generally prohibit employers from using noncompete clauses. Specifically, it would make it illegal for an employer to:
- enter into or attempt to enter into a noncompete with a worker
- maintain a noncompete with a worker
- represent to a worker, under certain circumstances, that the worker is subject to a noncompete.
The FTC is now seeking public comment on the proposed rule, which is based on a preliminary finding that noncompete clauses constitute an unfair method of competition and therefore violate Section 5 of the Federal Trade Commission Act.
“The freedom to change jobs is core to economic liberty and to a competitive, thriving economy.”
— Lina M. Khan, chair, Federal Trade Commission
Carol Davis is the Nursing Editor at HealthLeaders, an HCPro brand.
Photo credit: Paul Brady Photography / Shutterstock.com
KEY TAKEAWAYS
Employers frequently use their bargaining power to compel employees into signing noncompete contracts.
The FTC calls noncompete clauses “a widespread and often exploitative practice.”
Noncompete clauses create markets with fewer new entrants, causing higher prices for consumers.