FTC’s Ban on Noncompete Clauses: What Anesthesiologists Need to Know

For individual health care workers, the FTC’s rule may seem like an improvement to working contracts. For those signing new contracts, noncompete clauses are no longer legal, and for those with existing noncompete agreements, the terms are not enforceable, with an exception for senior executives in policymaking positions earning more than $151,164 annually – fewer than 1% of workers.

The rule bars employers from using contract clauses that block employees from leaving for other jobs or starting at a competing business in the same geographic area for a fixed period. The FTC states that such rules are an unfair method of competition that depresses wages and hinders new business formation.

With the elimination of noncompete clauses, the FTC estimates an average of 17,000-29,000 more patents will be filed each year, an increase of 11%-19% annually over a 10-year period. In addition, it expects a 2.7% increase in new business formation, or more than 8,500 new businesses per year. The ban is also expected to raise wages by $524 per year for workers and reduce spending on physician services by $74-$194 billion per year in the next decade.

Individual providers in support of the rule argue that noncompete clauses will force them to leave their communities and patients behind if they want to exit unethical or unsafe workplace conditions. With the ban in place, anesthesiologists would have the freedom to accept competing offers from facilities near and far.

One notable caveat of the rule is that it may not protect those who work for nonprofit hospitals and health care facilities, which currently employ the largest number of medical professionals and provide the majority of the nation’s care. Close to 64% of U.S. community hospitals are nonprofits or government-owned and could be exempt from the rule, though the FTC noted that some nonprofits could be bound by the rule if they do not operate as true charities.

Despite the potential benefits to workers, not all are in favor of the ban. Since President Joe Biden’s 2021 executive order instructing the FTC to curb the unfair use of noncompete agreements as part of a broader mandate aiming to boost U.S. economic competition and worker mobility, critics have spoken out against the rule. Business groups in Texas and Pennsylvania have filed federal lawsuits against the ban, with legal experts predicting that conservative judges will strike down the rule on the grounds that it exceeds the FTC’s statutory authority.

Hospital lobbies across the nation have signed on to a multisector letter of more than 230 industry associations and chambers of commerce that urges the FTC to extend the effective date of the ban. Signatories in the health care sector include the American Hospital Association and the Federation of American Hospitals, who both warn that the ban will have an outsized impact on the financial success of health care employers and remove important protections on proprietary information.

Others in opposition to the rule include the U.S. Chamber of Commerce, which filed its challenge to the ban in courts just one day after it was voted in, arguing that companies will face substantial legal costs in an attempt to protect their investments. These costs, the Chamber said, will cause the economy as a whole to suffer as startups and small businesses are unable to compete with dominant firms for hiring leading professionals. The Consumer Technology Association, Advanced Medical Technology Association, and several insurance broker associations and state-level chambers of commerce have also spoken out against the FTC’s decision.

For anesthesiologists, the ban on noncompete clauses could have multifaceted implications. Though some may be welcoming of banning onerous noncompete clauses that limit their mobility, others may find that the ban limits protections currently offered by practicing in a group. That’s according to Shena J. Scott, MBA, FACMPE, former Vice Chair and current member of the ASA Committee on Practice Management, and Founder and CEO at Scott Healthcare Consulting, Inc. “Some anesthesia practices provide services to a medical facility, and noncompetes have been used effectively in these scenarios to help keep a group of clinicians aligned,” Scott said. “This prevents a hospital from coming in and offering a significantly better deal to one or two physicians, leaving others in the cold.” She added that noncompetes have been used historically with smaller- or medium-sized groups and ultimately provide protection for each individual by strengthening the group. “Without a noncompete, the strength of the group is compromised by not being able to reign in individual interests, making it possible that some individuals could suffer as a result,” said Scott.

Regardless of whether an anesthesiologist practices in a group or not, Scott advises that clinicians should prepare for how the ban will influence their practice. She recommends consulting an attorney for changes to employment and shareholder agreements regarding noncompete clauses. “Be aware of what’s going on,” Scott warned. “If your agreements are not up to date, you may face penalties for not complying with the updated rules.”