FTC’s Proposed Non-Compete Ban to Impact Physicians

The Federal Trade Commission (FTC) has proposed a new federal rule that would ban all non-compete clauses, except in a few limited areas. The rule would also require companies to rescind any existing non-compete agreements at the time of the rule’s effective compliance date.

This proposed rule would apply to all businesses and professions, including doctors, hospitals and pharmaceutical and medical supply companies. Of course, the healthcare industry relies heavily on non-compete agreements and if the proposed rule is finalized, it would have a significant impact upon physicians and the companies that employ them.

The FTC calls out the healthcare market in multiple examples, hypotheticals, and factual circumstances regarding the perceived adverse effects of non-compete clauses. For the healthcare sector, these include higher consumer prices, greater market concentration and decreased labor mobility. 

Supporters of the ban, including the American College of Emergency Physicians (ACEP) and the American Academy of Family Physicians (AAFP), have declared that the rule should go into effect because restrictive covenants can impact the ability of physicians to provide medical services in their communities and can negatively affect the patient-physician relationship.

Opponents believe the rule may never become final due to legal challenges that are nearly certain to block the ban. Others argue that employers have less harmful tools at their disposal to protect trade secrets and other business interests than non-competes.

A recent Supreme Court ruling against the Environmental Protection Agency’s regulation upon carbon emissions hints that this proposed rule by the FTC may suffer the same fate.  The Supreme Court determined that federal agencies may only regulate according to the power expressly delegated to them by Congress and any attempts to use existing laws to develop new regulations would be presumptively invalid, and could reason similarly here. 

Any ban on non-competes would have far-reaching implications upon the healthcare industry.

For further information or assistance with any issue related to physician contracting, please don’t hesitate to contact The Durrett Firm – A Healthcare Law Firm, located in Atlanta, Georgia.