What the FTC’s New Ruling on Non-Competes Means For Physicians

This rule applies to all workers, not just those in healthcare, but it has far-reaching implications for physicians and hospitals. 

Physicians have long argued against non-compete arrangements, which typically restrict employees from taking a new job at a competitor, starting a new business, or sharing proprietary information. This often forces physicians to stay at jobs they wish to leave, move out of their communities to find work or settle for lower-paying jobs. Given the pace of hospital consolidation over the past three decades, physicians also have limited employment options because of noncompetes. 

The agency’s final rule doesn’t go into effect until 120 days after it is published in the Federal Register. There are likely to be many legal challenges along the way. 

At Earned, we've been following the changes in noncompete laws at the state level. So here’s a breakdown of what the new federal rule could mean for physicians.

What’s in the FTC non-compete rule?

The new rule is straightforward – it would bar future non-competes for workers and invalidate existing ones. 

Once it goes into effect, the FTC says employers will have to notify employees (apart from senior executives) who are bound to an existing non-compete that the non-compete agreement will not be enforced against them in the future. The ruling does not apply to nondisclosure agreements and trade secret laws, which employers can still use to protect proprietary information, according to the agency.

Physicians should be aware that there are some caveats to the rule regarding senior executives and whether or not an employer is a nonprofit.

Who is affected by the noncompete ban – and who isn't?

All types of working physicians rule

The rule applies to physicians working full-time as W-2 employees, as well as 1099 contractors. The ban also applies to any work physicians perform for any employer, including side gigs such as locum tenens or serving as a medical reviewer.

Senior executive exemption

The rule does not invalidate existing non-competes for those in senior executive positions, defined as those earning above $151,164 annually and holding policymaking positions. This means existing non-competes for senior executives stay in place until the final rule, according to the FTC, but it prohibits any new non-competes with those in senior executive roles.

Physicians who are partners in independent practice will qualify as senior executives assuming they meet the FTC rule's compensation threshold and make policy decisions. Under the rule, a physician who works as a department head at a hospital system but has no authority to make policies for the whole system would likely not be considered a senior executive.

Nonprofit employers

Nonprofit employers may not have to enforce the ban, because they do not typically fall under the jurisdiction of the FTC. Almost half of hospitals nationwide are nonprofits. It remains to be seen whether nonprofit employers, including hospitals, will be covered by the ruling. The FTC’s past actions and the wording of the rule leave room for interpretation, legal experts say. 

The American Hospital Association, which opposes the ban, has argued the agency doesn’t have the authority to ban noncompetes. The AHA also lobbied the FTC to exempt doctors and executives from any final regulation.

What the non-compete ban could mean for working physicians

Freedom to switch employers and higher earnings 

The end of noncompetes would mean physicians have more flexibility around switching employers without being subject to time, scope, or geographic restrictions. 

Noncompetes also limited worker bargaining power in some cases, which meant physicians had to accept lower-paying jobs or move to lower-paying fields within healthcare.

The FTC says the final rule "is expected to result in higher earnings for workers with estimated earnings increasing for the average worker by an additional $524 per year." Lower health care costs 

In its research leading up to the rule, the FTC found evidence that noncompetes increase consumer prices for medical care. Once the rule goes into effect, the agency says, "it is expected to lower health care costs by up to $194 billion over the next decade." 

How Earned can help

The FTC’s rule is not yet law, but if you are considering a career change given the changes related to noncompete agreements, Earned can help by evaluating the financial implications of another job opportunity. Our expert advisors specialize in wealth management for physicians and can present tailored options to help optimize your financial health and well-being.

It all starts with a conversation. Contact Earned to schedule a complimentary consultation today.