Did the FTC just free you from your physician non-compete?!

What just happened?

On April 23, 2024, the Federal Trade Commission (FTC) introduced a transformative new rule targeting non-compete clauses, heralding a seismic shift in employment practices, particularly within the healthcare sector. This rule carries profound implications for physicians and healthcare organizations, altering the landscape of physician employment contracts and potentially reshaping the dynamics of patient care delivery. While the details are complex, the bottom line is that the FTC effectively banned almost all non-compete clauses nationwide, both prospectively and retrospectively!

And good riddance! Non-compete clauses have long been a contentious issue in physician employment contracts, often restricting doctors from practicing within a certain geographic area or specialty after leaving their current position. These clauses, while supposedly designed to protect patient relationships and safeguard confidential information, have faced criticism for limiting physician mobility, hindering patient access to care, and exacerbating healthcare workforce shortages, especially in underserved areas. Non-competes have also often been cited as allowing healthcare organizations to ignore workplace toxicity and physician burnout, as providers have been unable to leave and seek green pastures.

Does this rule really apply to physicians?

It appears so! The major exception to the rule are workers who already have non-competes and are deemed “senior executives.” Specifically, the final rule defines the term “senior executive” to refer to workers earning more than $151,164 annually AND who are in a “policy-making position.”

While most physicians make more than $151,164 per year, they are not in policy making positions. In fact, healthcare organizations have done everything in their power to reduce physician autonomy and decision making over the last 20 years, making it almost impossible to argue that front-line clinicians are in “policy making positions.”

How will healthcare employers fight this rule to keep you trapped?

Two ways.

First, organizations will try to hide behind non-profit status. Approximately 60% of healthcare organizations claim some non-profits status, despite making billions of dollars of profit each year. The FTC historically does not have jurisdiction over not-for-profit entities.

However, the FTC sees through this charade, and has reserved the right to review healthcare employers non-profit claims as it applies to this rule. Specifically, the FTC stated that “some portion of the 58% of hospitals that claim tax-exempt status as nonprofits and the 19% of hospitals that are identified as State or local government hospitals in the data cited by AHA likely fall under the Commission’s jurisdiction and the final rule’s purview.” It is unlikely that the non-profit shield will hold.

Second, organizations will fight by characterizing as many of their physicians as possible as policy makers or senior executives. This might be a reasonable argument for the chair of a major academic department, for example. But what if your orthopedic group has 57 offices throughout the state, and you are the clinical lead for one of those sites? That is a stretch – but they might try.

So should I draft my resignation tonight?

Hold your horses. First, the FTC has to publish the rule, then there is a 120 day wait period. So you likely have a few months. Also, you can expect legal challenges, so the landscape may change.

However, now is the perfect time to start looking at your options for the coming year!  You no longer have to uproot and move to another state to escape your toxic employer just because you have a non-compete. So start looking at the competition next door. Or use your new found power to re-negotiate. Now is the time to lay the foundation for change.

The FTC non-compete rule is probably the most important change in employment law for physicians in the last 20 years. It represents an incredible opportunity for you to make your career work better for you. And if you need help, don’t hesitate to reach out and learn what is possible for your career!