Not being in the healthcare profession, I had no idea it’s such a big deal there.
In my profession, software consulting, it’s in every employment contract but rarely enforced, so it’s mainly a scare tactic.
I posted a question on the PBR.
There's politics at the top thread on this page right now
Although it may be enforceable where a not for profit is working with a for profit.
This is unfortunate as hospitals and health systems are big abusers and most are not for profit.
should apply across the board. There are alternate ways to achieve reasonable goals - where I find handcuffing employees not to be reasonable.
Over Not for profits. It is unclear if they have any authority for regulation when a not for profit is in business with a for profit, e.g. a private for profit physician practice group.
It would be great if any enterprise that previously employed them could be sued into bankruptcy. That's how terrible I find them to be.
Edit to add, yes, the above is aggressive. I have direct experience with these things multiple times. They are abusive, there is no other way around it. If it matters, I am a generally somewhat right of center independent. At least that's what I like to think that I am. More conservative on fiscal issues, more liberal on social ones. That may vary somewhat depending upon the specific issue.
they were always difficult to enforce anyway (usually the hospitals got greedy with distance and duration requirements) but a lot of our clients just didn't want the hassle.
all have been modified and expanded in a way that most don't appreciate.
I am sympathetic to the arguments against most non-competes. I am concerned this is overly broad.
I hope all three get struck down and Congress has to vote them in. I suspect the OT changes will mostly hold. Title IX? Maybe not. And this too could be viewed as an overreach.
Pretty activist regulatory regime which is always my biggest issue with academic Dems.
P.S. FTC has lost in court on some M&A. But not deterred.
P.P.S. There have to be some non-competes that can be allowed on a go-forward basis if paired with negotiated compensation as an offset. Perhaps that carve is buried in the new rules.
Probably the most defensible given the tortured history of this issue. The FTC rule is a watershed. It will be enjoined within the next two weeks.
California has idiotic OT rules. As long as we stay away from that we are fine.
They’re terrible. I do question the FTC’s authority here, so it will be interesting to see how that plays out.
In California, Noncompete Clauses are valid for key individuals, but not for a vast majority of workers. If you are a company founder who sells the company, you can, under California law, be bound by a non-compete from starting a new company that is similar under certain conditions. I don't think this is a bad idea.
Blanket elimination of non-compete clauses just means that now the price that someone will get for selling their business will be substantially less than they received before because the risk is higher that they will just go start a new, identical business. This can be mitigated through earn-outs and similar instruments, but essentially all this will do is reduce the selling price of businesses.
I wholeheartedly agree that noncompetes shouldn't exist for most workers. They do have a role in M&A transactions, though.
As a result, I believe noncompetes in M&A transactions will continue to be enforceable. I also understand that the new rule does not prohibit nonsolicitation provisions (a common restrictive covenant preventing a person from soliciting customers or employees of his or her former employer).
I also agree with you that if noncompetes become unenforceable in M&A, then the value of a seller's business will be diminished. This is especially true in a service business like medical or dental. Seems like a double edged sword for the doctors.
It should be obvious, but none of this is legal advice.
Lack of non-solicitation agreements / clauses would very much disrupt the M&A market as well. It's very difficult to protect a newly acquired asset if it can be cannibalized shortly after transfer.
I understand the justifiable complaints of people in the medical and financial fields that they should have the right to have customers/patients from their former place of work, since they are following the person who provided them service in the past.
The tech field offers the possibility of a group of workers in the same field offering a lower cost alternative (due to smaller overhead) to their currrent employer. It's especially bothersome if these workers use technology developed by others (i.e. they're selling the product of others rather than a product they developed). I've seen threats of this in specialized fields or field sites. In many of these cases it's more than a wage issue.
It's certainly not facially unconstitutional---unconstitutional for everyone in any circumstance---under Wickard and Lopez.
I think your position assumes that the Executive Branch has the power to enact such a law. Some disagree. The "major questions" doctrine will be important.
That's only tangentially a Constitutional question. The executive, of course, doesn't have the power to enact any laws. But Congress has authorized the FTC to make regulations on a wide variety of matters, and this kind of regulation is certainly within Congress's powers under prevailing doctrine.
Is it within the permissible scope of the FTC's regulatory authority under the FTC Act? That I don't know. But if it isn't it will be because of what the FTC Act says, not because of what the Constitution says.
The argument that will be made - and has already been made by Gibson Dunn on behalf of Ryan, LLC - is that the Noncompete Rule violates the Constitution in a number of ways (unconstitutional delegation of legislative power in contravention of Article I; FTC Act's removal protection for Commissioners violates the Vesting Clause of Article II).
For what it's worth, I think that analysis by courts will likely involve the FTC Act, the APA, application of the "major questions" doctrine, and the Constitution. Glad people far smarter than me will be deciding this.
Isn't the same thing as finding it unconstitutional.
be struck down for lack of executive authority.
I think the odds of a nationwide injunction pending review are high.
I was handcuffed by a non-compete for my entire career. It is one thing I remain bitter about.
My suspicion remains as it was when they first announced the proposed rule, that this will shift a lot of work to common-law unfair-competition law while providing little tangible benefit in states that already imposed significant limits on such agreements. (Though I think vermin's points about medical specialists is probably spot-on.)
What will be particularly interesting with doctors is how this interacts with broader trends involving payor organizations acquiring practice groups.
Can’t say I’ve ever seen one that had any purpose but to be exploitative.
Take care of people and pay them a fair market wage. Or they will go to someone who does. Seems like a pretty capitalist idea.
Also I'd be shocked if there isn't a nationwide injunction by the end of the week. Vote was 3-2, with a dissenting commissioner laying out what he believed were Constitutional issues with the FTC's authority in this instance.
crappy news as i run hospitals. so I'm happy for you. here's your cookie. the thumb just gets smushed harder next time around on uguyz.
So yeah, it's a fairly big deal, but a crappy deal. Docs sign the contract. They can read.
Spoken like a true administrator.
Most noncompetes are “non-negotiable”. Just the way the hullking 800 pound gorillas do business.
1) lobby to keep hospital reimbursement indexed to inflation, but not doctor reimbursement (which deflates). Make it difficult for private doctors to compete unless they have ownership interests in facility/hospital/laboratory services .
2) lobby to keep physicians from being able to own said services which are indexed to inflation. See “certificate of need” which the fcc has already opined is restraint of trade. And yet, they continue.
3) incentivize employed doctors to refer only to other employed specialists through at best questionably legal means. Run nonemployed doctors out of business as circumstances allow.
4) remove employed doctors negotiating power to renegotiate their contracts once the initial contract is up by attaching a noncompete which survives the termination of the contract.
A locked in workforce powerless to effect change or resist the dictates of the hospital c suite. Yeay!
As a matter of public policy, the public shouldn’t be prevented from getting treatment from the doctor of their choice because a hospital prevents a doctor from practicing anywhere but within its walls. Still can’t understand how these are unenforceable against lawyers but are against doctors, whose services are actually life and death.
purchase price/transaction with the new employer? I am OK with that non-compete for a period of time. To me then that is different than signing one right out of med school everywhere you work, which I would be happy if gone.
Who sells their business, what are other appropriate cases? They seem to be too broadly overused in two respects. First, requiring them for employment, generally. Second, two entities doing business together and colluding in their commercial contract to not poach each other’s employees. I understand the latter is a non-solicit but the health care industry is a huge fan of both for a similar purpose.
Most of the cases I have seen in which exiting employees were able to destroy their former employers more or less overnight (which strikes me as the universe in which noncompetes are salutary) fall into two categories:
1. Senior managers or owners capable of replicating the entire operation and effectively transferring the former business en masse, either because of their own client relationships or because of their relationships with other key employees, and
2. Key client-facing individuals in fields where their expertise or relationships drive client loyalty.
Say your job is wholesaling cardboard. That's a commodity, so people are going to buy it based on (1) price, (2) logistical efficiency, and (3) relationships. If everyone in your region knows you a the guy who gets them their cardboard on time, it doesn't take much for you to put a new company name and phone number on your POs and walk out the door with all of that business.
Now, it's totally different if, say, you just deliver the cardboard and nobody really cares who you are.
The company isn't really worth that much, it's just the person who has that worth. That person could give the company some value by binding themselves to employment for a term of years with specified damages in the event of breach.
If a manager or owner is capable of replicating the entire operation that easily, I'm unclear why the company should be privileged over the manager or owner.
It's usually (as others have pointed out) because the owner sells his interest in the company to someone, which strikes me as a pretty good reason.
is not all that valuable unless the company has the owner in an employment contract -- that contract is where the negotiation should be, and contemplation of liquidated damages seems appropriate in these cases moreso than a prohibition against competing whenever the owner actually departs.
There are plenty of circumstances where a company is perfectly viable following an owner's (or co-owner's) departure, provided the former owner himself isn't out there competing.
And in the owner context, the problem isn't keeping him from departing (who, exactly, is the owner going to make that promise to whilst he's still the owner), it's keeping him from changing his mind after he voluntarily decides to depart.
for the business and structure the buyout differently, rather than shackle with a noncompete. It can achieve the same ends via different means.
Owner buyouts in small businesses aren't usually adhesion contracts drafted by the buyer.
Edit: And it's wishful thinking to assume that structured payouts will generate the same protections as a restrictive covenant in every case. If the seller concludes he can undersell his old firm, it could certainly be economically rational for him to get back in the game and forgo the later installments. Whether he can do that consistently with tort law and the Lanham Act depends on the circumstances, but contracts allowed parties to avoid a lot of indeterminability and uncertainty on those questions.
by this on multiple occasions, and my spouse has been on both sides of it.
I am not understanding why a buyer of a small business might not be able to structure the buyout in such a way to protect their interests rather than including a non-compete clause. If you care to explain it in simple terms so that I can follow along I will be happy to learn. That's not snark, I really would be happy to be enlightened.
employee to stick around. The non-compete is used to shackle them to the business.
What company resources were used to build that clientele? A business should be able, at some level, to protect their investment.
I'd have no issue with a company requiring a non-compete when they've paid for school or other training.
to exploit the rule to their advantage, rather than simply protecting their investment. They can and should protect their investment via other means. Non-competes are unnecessary. I understand circumstances listed where they might be of more use, but I have zero trust that they will not be abused. Businesses can and should find other ways to achieve their ends. If that costs them, I am unsympathetic. Their actions led to this outcome.
Supposing that an electrical company takes on unskilled workers to provide them with apprenticeship training, truly investing in their. Before investing a bunch of time and resources into this training project, the company might reasonably want some assurances that they'll get an ROI.
Both the company and the potential trainee are likely better off if the trainee can be prevented from leaving for a competitor immediately after the training is complete, as the trainee would receive the benefit of the on the job training, and the company would receive the benefit of reduced turnover if they invest in such training. As a general matter here, the entire industry would also likely benefit, as on-the-job training would likely be more beneficial than school-based training, so all companies would eventually have more, better-trained workers.
The incentive to train the employee well is in the best interest of the company regardless if the employee can leave. The ability to retain the employee is almost always within the control of the company by offering sufficient compensation, benefits, and culture, without the need to contractually prevent the employee from leaving. Sometimes employees leave, but more often than not whether they leave is within the company’s control.
That is, certainly there's the potential for abuse, given subjective debates about what constitutes robust enough training. There's obviously real costs to taking on an untrained apprentice, and fully training them up in terms of both time, lost productivity, etc... But rules put in place to provide exceptions here could be gamed by employers to put in place sham training programs that don't require that much effort solely as a way to lock in new hires and depress wages.
I don't agree that the incentive is always there for the company to train well. There's an incentive to free-ride, not put in the effort in training, and then go poach employees with slightly higher pay because you don't have the underlying costs associated with training.
"senior executives" which basically means you made more than $150K and had "policy making" authority.
I suspect that that limited carve-out would allow for owners who sold their practice to be bound for a term of years. However, the ban on non-competes going forward is total and complete without exception.
Perhaps smart lawyers will figure out an alternative. Some non-competes make perfect sense. They are going too broad.
Your practice and then walk down the street, set up a new shop, and recruit all your former patients.
But a salon making a stylist sign a non-compete is ridiculous. There’s no economic compensation there.
They have their place, but it's not the one they have been occupying.
And the company has to protect that secret method of assembling a sandwich in front of you. Come to think of it, the sandwich wrapper might be a non-compete agreement that was just imposed on me for witnessing said assembly.
Structured to pay out annually, or after a certain number of years in a trust. 5 years to have your equity or funds vest. Or retention bonuses instead of guaranteed up front payouts.
No reason to keep a doctor from moving down the street if the person who bought the practice implements unethical practices which the doctor can not decline.
A monetary penalty for breaching the deal is not a noncompete.
At said hospital, So I bake my own cookies, thanks. Happy for my brethren that are still stuck in your world though.
ER docs, Hospitalists, and Anesthesiologists do not have a patient panel, they don’t advertise and patients don’t go to a hospital for them personally. There is no good business reason other then keeping salaries lower and preventing the free market from working on salaries locally for institutions to demand them. They are also never negotiable and I’ve never met an employer who is willing to change the policy. It’s a welcome change.
Practice groups might now form around lifestyle and other value drivers, particularly in larger metro areas
patients. Hopefully this helps.