The Federal Trade Commission (FTC) recently announced a new rule that could shake up all markets throughout the nation, including the healthcare sector. The Non-Compete Clause Rule states that use of non-compete agreements is an unfair method of competition. The rule allows for clauses that are currently in effect for senior executives to remain in force but states other non-competes are not enforceable after the rule’s effective date.
The agency cites growing concern about the harm of non-compete agreements along with a rise in their use as reason for pushing the rule forward. The rule defines a non-compete clause as a term or condition of employment that prohibits, penalizes, or otherwise prevents a worker from finding other employment. The term “senior executive” involves two prongs:
- Those with the ability to influence policy, and
- Total annual compensation of $151,164 or more.
The rule has led to much debate. Some of the top concerns that apply within the healthcare sector include the following.
#1: Oversite
At this time, the ban does not apply to nonprofit entities. However, the agency has stated it reserves the right to review a hospital’s nonprofit status — signaling the potential for additional future scrutiny.
#2: Staffing
President and CEO of the Federation of American Hospitals has voiced concern that because the rule does not apply to nonprofit entities it will result in an unequal playing field and further argues the move will put strain on a healthcare system that is already struggling to have enough workforce to meet patient needs. In contrast, FTC Chair Lina Khan has stated that 25,000 of the 26,000 public comments on the proposal were in favor of the change — and that healthcare workers made a “significant chunk” of this group.
The future of the rule is uncertain. There is an argument that the FTC does not have the authority to move forward with this type of rule without Congressional support and the United States Chamber of Commerce has already stated that it will pursue a challenge to the rule. The upcoming election could also play a role in the future of this rule. We will provide updates and information on the potential impact on healthcare as more information becomes available.
Attorney John Rivas is responsible for this communication.
