The New FTC Rule on Non-Competes: How does it Impact Physicians? Analyzing the Dichotomy Between Regular Physicians and Senior Executive Physicians

According to the Proposed Rule - the short of it is that most clinical workers, including physicians, will no longer have to comply with non-compete agreements.

Federal Trade Commission has taken a very ballsy position.  However this rule is not official law yet. The new rule states that non-competes shall not apply to regular staffers in a business.  However, if a healthcare worker is making more than $151,164 per year AND is deemed to be a senior executive, then the non-compete provisions will apply.  For instance the CMOs are not off the hook.  Let us see how the commission, the states, and the courts apply the rule, or what the legislature has in store.  Tread lightly for now, lets see how the rule gets interpreted and applied.  This is not legal advice, this is simply my take on the new FTC Rule.  The rule is not officially effective yet, if there are no challenges it is expected to go into effect late August (120 days from the date of publication in the Federal Register). 

Here is the Breakdown:

The Federal Trade Commission's (FTC) recent introduction of 16 CFR Part 910 represents a landmark transformation in the governance of non-compete agreements, with profound implications for the medical profession. This regulation delineates a nuanced app

roach to non-compete clauses, particularly affecting two distinct categories within the healthcare workforce: regular physicians engaged primarily in patient care and senior executive physicians who hold significant administrative or policy-making roles. The rule's bifurcated impact stems from its reliance on two pivotal criteria: the earnings test and the job duties test. This article delves into the ramifications of these criteria for both sets of physicians, aiming to unpack the complexities of how the new rule reshapes their professional landscapes.

Overview of the Regulatory Framework

At the heart of the new FTC rule is an attempt to strike a delicate balance: it seeks to protect workers from overly restrictive non-compete agreements while acknowledging the legitimate interests of employers in safeguarding their operational integrity. For healthcare professionals, the rule sets a compensation threshold of $151,164, above which physicians could potentially be exempt from certain non-compete restrictions, provided they also fulfill a job duties criterion. This criterion necessitates a significant engagement in policy-making activities, thereby creating a dual threshold that distinguishes between those whose roles are primarily clinical and those with substantial administrative or executive responsibilities.

Impact on Regular Physicians

For the majority of physicians whose work is predominantly clinical, the new FTC rule offers a promising liberation from the constraints of non-compete clauses. These physicians, whose daily duties are focused on patient care rather than organizational policy-making or strategic decision-making, are unlikely to meet the dual criteria for exemption. Consequently, this group stands to benefit from increased professional mobility, allowing for greater flexibility in employment opportunities and potentially fostering a more competitive and dynamic healthcare market. This shift acknowledges the essential nature of their clinical work and aims to ensure that patient care and access to healthcare services remain paramount, unaffected by the deterrent effects of restrictive non-compete agreements.

Senior Executive Physicians: A Differentiated Perspective

On the other end of the spectrum, senior executive physicians—those who occupy pivotal roles in the strategic and policy-making echelons of healthcare organizations—face a different set of considerations under the new rule. These individuals, by virtue of their compensation and the nature of their job duties, might qualify for the senior executive exemption, subjecting them to a more nuanced evaluation of their non-compete agreements. The rule recognizes the unique position of these physicians, whose decisions and leadership significantly influence the direction and operational strategies of their organizations. For them, the rule does not outright preclude the application of non-compete clauses but instead requires a demonstration that their roles are indeed of a nature that justifies such restrictions. This approach seeks to balance the protection of the physicians' rights to mobility with the healthcare organizations' need to protect sensitive information and maintain competitive advantage.

Conclusion

The FTC's new rule on non-compete agreements introduces a critical distinction between regular physicians and senior executive physicians, reflecting a nuanced understanding of the diverse roles within the healthcare sector. For regular physicians, the rule promises enhanced professional freedom and mobility, potentially leading to improved healthcare delivery and access. For senior executive physicians, it presents a framework that acknowledges their unique contributions to healthcare organizations while still offering protections against unwarranted restrictions on their employment. As the implications of this rule unfold, it will be essential to monitor its impact on the healthcare workforce, organizational dynamics, and the overall quality of patient care. The ultimate success of the regulation will hinge on its ability to harmonize the diverse interests at play, fostering an environment where both physicians and healthcare organizations can thrive.

Physicians will hopefully get a Break soon.  Fingers Crossed. 

Ben Assad Mirza

Here is the 570 page rule and commentary if you are interested in reading it.  

If you are thinking about leaving your current employer, and need help in understanding provisions regarding: confidentiality, trade secrets, needing access to medical records, tail insurance provisions, or payout of your bonus compensation you may want to contact your legal counsel or our law office.   

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