Feb. 10, 2023 (ACP) — The American College of Physicians is getting ready to send guidance to the Federal Trade Commission (FTC) about a proposed regulation to ban noncompete clauses in employment contracts, including those that prevent doctors from working for nearby competitors.
“We're really encouraged by this rule, since maintenance of strong patient-physician relationships is a top priority,” said Shari Erickson, ACP chief advocacy officer and senior vice president.
As she explained, noncompete clauses, also known as restrictive covenants, are common in medicine. “They can restrict the ability of a physician who leaves an institution to maintain their patient population for some period of time in that geographic area,” she said. “That's problematic.”
As noted in the ACP Physician Employment Contract Guide, some states ban the restrictions, calling them anticompetitive restrictions on trade. Other states “will enforce them as contractual business obligations but only if the restrictive provisions meet certain tests of ‘reasonableness' with regard to the geographic and time limits.”
While restrictions may be appropriate in some cases, Erickson said, contracts should not limit physicians from taking actions that are in a patient's best interests. “We call on our members to not sign contracts that include these restrictive covenants,” she said.
The ACP 2021 policy paper “Ethical and Professionalism Implications of Physician Employment and Health Care Business Practices” states that “physicians should feel empowered to negotiate and, if necessary, refuse to accept terms that do not align with ethics and professionalism.”
The FTC announced its proposed regulation on Jan. 5, noting that noncompete clauses are a “widespread and often exploitative practice that suppresses wages, hampers innovation, and blocks entrepreneurs from starting new businesses. By stopping this practice, the agency estimates that the new proposed rule could increase wages by nearly $300 billion per year and expand career opportunities for about 30 million Americans.”
An estimated 18 percent of Americans are covered by the clauses, the FTC added.
Specifically, the proposed regulation banning noncompete clauses would prevent employers from entering into — or attempting to enter into — a noncompete arrangement with a worker. It would also prevent employers from maintaining a noncompete arrangement with a worker or representing to a worker, under certain circumstances, that the worker is subject to a noncompete arrangement. Independent contractors would be covered by the rule, as would unpaid workers. However, Erickson noted, it appears that the proposed rule may exclude nonprofit entities, which could limit its impact in the health care space, given that a large number of physicians are employed by nonprofit health care organizations.
In addition, the FTC says the rule “would also require employers to rescind existing noncompete and actively inform workers that they are no longer in effect.”
The FTC is accepting comments about the proposed regulation until March 20. ACP is drafting its comments now and is developing an Action Alert to send out to members of the Advocates for Internal Medicine (AIM) Network in the coming weeks. This Action Alert will offer individual ACP members the opportunity to share comments directly with the FTC on this proposed regulation. ACP Members can join the AIM Network by visiting https://www.votervoice.net/ACPONLINE/home.
If approved, the regulation will go into effect 180 days later.