Noncompete agreements: 5 figures to know

The Federal Trade Commission's proposed ban on noncompete clauses in employment contracts could allow healthcare workers to freely move between employers amid the ongoing workforce shortage, but hospitals are not as keen on the idea, according to Kaiser Health News.

If enacted, the FTC's rule would end employment contracts that bar individuals from working for a competing employer or opening their own practice of similar scope in the same area after they move on, which hospitals worry would force them to pay more to keep the physicians and healthcare workers they do have from moving on. 

It is something the American Hospital Association has called on the FTC to scrap altogether, claiming that "the proposed rule would profoundly transform the health care labor market — particularly for physicians and senior hospital executives. It would instantly invalidate millions of dollars of existing contracts, while exacerbating problems of health care labor scarcity, especially for medically underserved areas like rural communities." 

The American Medical Group Association also came out in opposition to the proposed rule. 

However, workers and other organizations including National Nurses United, the American Academy of Emergency Medicine and the American Medical Association have come out in favor of the changes, citing flexibility to expand their opportunities to practice without limitations.

Research on ending noncompete agreements in the healthcare sector reveals the following points on both sides of the aisle: 

  1. Although employers argue that noncompete agreements are negotiable, only 10 percent of individuals do negotiate them.

  2. Around 45 percent of primary care physicians sign noncompete agreements.

  3. Nearly 1 in 3 employees in the U.S. are presented with noncompete agreements after they have already accepted an employment offer.

  4. Over 30 million workers — at least 18 percent of the U.S. workforce — must sign these agreements as a condition of employment.

  5. Noncompete agreements cost U.S. households $5,000 a year through enforcing lower wages and less competition, according to data cited in an executive order from President Joe Biden.

"California, North Dakota, and Oklahoma already ban enforcement of noncompete clauses for all employees, while six other states prohibit enforcement of noncompete clauses for physicians," according to Kaiser Health News. "Even in states without bans, judges have invalidated noncompetes when they found them to be overbroad or unreasonable." 

The comment period deadline for the FTC's proposed rule was pushed back to now end April 19.

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