Physicians are often frustrated by government rulings that affect their ability to run their practices and treat their patients. Typically, the agency responsible for stirring the pot is the Centers for Medicare & Medicaid Services. However, another agency recently caught the attention of physicians nationwide—the Federal Trade Commission (FTC).
On April 23, 2024, the FTC issued a final rule banning non-competition agreements. After months on a rollercoaster of litigation and uncertainty, the FTC Final Rule was halted by a federal court in Texas, in the form of a nationwide injunction. Now the question looms: What does this mean for current and future physician non-competes?
The FTC Final Rule shook employers across all industries because non-competes have become a ubiquitous tool used to protect business plans from disruption. Non-compete provisions, stating the worker may not engage in a similar business within a certain area for a certain time period after they have terminated employment from their current job, are often incorporated into employment agreements.
On the one hand, the value of a non-compete is obvious: Employers invest many hours and resources into their workers, so they don’t want that worker to simply set up shop nearby and compete with them directly. On the other hand, non-competes can become burdensome to the worker, forcing them to stay with a company because they don’t have viable options to work elsewhere.
Non-competes have historically had varying degrees of enforcement. Certain states have restricted the area within which a non-compete may be enforceable or the length of time for which a non-compete can be enforced. For professional services like physician services, non-competes can be restricted due to the fact that an overly broad non-compete could endanger a community by cutting off access to adequate medical services.
What Did the FTC Final Rule State?
If enacted as planned on Sept. 4, 2024, almost all existing non-competes would have been invalidated for workers at for-profit entities. The definition of “workers” under the FTC Rule is not limited to employees, but includes other individuals who provide services for healthcare entities, such as independent contractors, interns and volunteers.
As the FTC Final Rule was written, employers were required to provide a notice to all current and former workers who have a non-compete, stating their non-compete would not be enforced. Employers were encouraged to review their worker census and list of terminated workers to determine to whom they were required to give this notice.
