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FTC Ban on Non-competes: Implications for Healthcare 

non-competes

On January 5th, 2023, the Federal Trade Commission (FTC) introduced a new law that prevents businesses from imposing non-compete agreements on their employees (3). Non-compete agreements are a common tool used by employers to prevent employees from taking new jobs at competitor companies within a certain time frame after the end of their current position (3). Arguments for non-competes often include protecting the time and monetary resources, skills, and strategy of a company. However, arguments against them are plentiful. According to the FTC, these agreements reduce wages by up to $300 billion per year and suppress competition in a variety of industries, including healthcare (3). Non-compete agreements often reduce access to medical care by restricting physicians, nurses, and other healthcare providers’ ability to move freely between employers (1). As a result, banning non-competes may improve the accessibility and affordability of healthcare, as well as increase healthcare providers’ earnings. 

Non-compete agreements restrict physicians’ abilities to provide medical care to their communities when they choose to or are forced to switch jobs (5). By limiting the ability of physicians to practice, these agreements can prevent doctors from joining a particular hospital or another employer (4). Furthermore, some employers may use non-competes to influence the behavior of healthcare providers (5). For example, some physicians who were asking for greater protections against COVID-19 in 2020 were silenced by threats of termination, since they wouldn’t be able to find new work for at least six months due to their non-compete agreements (5). 

Studies show that the vast majority of physicians have negative perceptions of non-compete agreements (4). One study found that non-compete agreements negatively affected the availability of applied behavior analysis practitioners—healthcare professionals that help treat developmental disabilities and improve the functioning of various organizations (1). In the case of a highly specialized field like ABA, non-compete agreements can restrict the availability of providers who offer that service in a particular region. Additionally, non-competes lower healthcare workers’ wages. To illustrate, one model by the FTC found that removing non-compete agreements would lead to a 37.5% salary increase for a physician with one year of experience in the workforce (2). 

Employers contend that noncompete agreements protect business interests and proprietary information. However, in healthcare, the services and skills provided by physicians are rarely unique to their place of employment (4). Consequently, there is less of a role for non-competes in healthcare compared to some other industries. 

References 

  1. Brown, Kristopher J, and Matthew T Brodhead. “Reported Effects of Noncompete Clauses on Practitioners in Applied Behavior Analysis.” Behavior analysis in practice vol. 16,1 251-264. 31 May. 2022, doi:10.1007/s40617-022-00718-4 
  1. Davis, Jeffrey. “A Game-Changer? The FTC Proposes to Ban Non-Compete Clauses in All Employment Contracts.” American College of Emergency Physicians, 23 Jan 2023, www.acep.org/federal-advocacy/federal-advocacy-overview/regs–eggs/regs–eggs-articles/regs-and-eggs—january-12-2022/ 
  1. Hsu, Andrea. “Millions of workers are subject to noncompete agreements. They could soon be banned.” NPR, 5 Jan 2023, www.npr.org/2023/01/05/1147138052/workers-noncompete-agreements-ftc-lina-khan-ban 
  1. Sherman, William F et al. “The Impact of a Non-Compete Clause on Patient Care and Orthopaedic Surgeons in the State of Louisiana: Afraid of a Little Competition?.” Orthopedic reviews vol. 14,4 38404. 14 Oct. 2022, doi:10.52965/001c.38404 
  1. Smith, Erik B. “Ending Physician Noncompete Agreements-Time for a National Solution.” JAMA health forum vol. 2,12 e214018. 3 Dec. 2021, doi:10.1001/jamahealthforum.2021.4018