FTC warns about non-compete agreements with doctors, nurses
The Federal Trade Commission sent letters to providers and staffing agencies to be sure they are complying with regulations, and says enforcement is a top priority.
Federal regulators are warning healthcare organizations to take a close look at their non-compete agreements to be sure they aren’t violating any laws.
The FTC has sent letters to healthcare organizations expressing concerns about non-compete agreements with doctors and nurses.
The Federal Trade Commission also says it will be watching closely, and is ready to act if it finds companies are putting unreasonable language in those agreements.
FTC Chairman Andrew N. Ferguson has sent letters to healthcare organizations and staffing agencies to remind them that they need to be certain non-compete agreements are in full compliance with federal law. He pointed specifically to contracts involving doctors and nurses.
Ferguson says in the letter that it’s concerned that healthcare employers and staffing companies are using non-compete agreements that “may unreasonably limit employment options for vital roles like nurses, physicians, and other medical professionals.”
“Noncompetes may have particularly harmful effects in healthcare markets where they can restrict patients’ choices of who provides their medical care—including, critically, in rural areas where medical services are already stretched thin,” Ferguson said in the letter.
Some employers have top executives sign non-compete agreements that prevent them from working for a rival for a certain amount of time after they leave the organization. Proponents of such agreements say they are designed to protect companies from being hurt by executives taking sensitive information to competitors.
The FTC’s letter to healthcare organizations is notable since it makes it clear that regulators are going to be paying attention to such agreements in the healthcare industry.
President Biden’s administration sought to largely abolish non-compete agreements, an effort that drew intense opposition from hospitals and other healthcare organizations.
A federal judge issued a ruling in August 2024 blocking the FTC from enforcing the regulation, and hospitals and health systems cheered the ruling. Hospitals had said the FTC lacked the authority for such sweeping rules and said the Biden regulations would create an uneven playing field for providers.
Just last week, the FTC said it would not continue the Biden administration’s legal appeal of the judge’s decision. In a statement, Ferguson sharply criticized the Biden administration’s attempts to eliminate most noncompete agreements.
But Ferguson also said, “We will continue to enforce the antitrust laws aggressively against noncompete agreements.”
Kelse Moen, deputy director of the FTC’s Bureau of Competition and co-chair of the agency’s Joint Labor Task Force, said in a news release that going after “unreasonable noncompete agreements remains a top priority for the Federal Trade Commission.”
“We strongly encourage all employers—not just those receiving letters today—to review their contracts closely, to ensure that any restrictions on employee mobility are in full compliance with the law,” Moen said in the statement.
While hospitals objected to the Biden administration’s efforts to do away with most noncompete agreements, advocacy groups representing doctors have said that healthcare organizations are using such agreements far too broadly. Physicians say the improper use of those agreements make it harder for doctors to make different choices to advance their careers or earn more money.
The American Medical Association has supported efforts to rein in non-compete agreements, saying such pacts cover 37% to 45% of doctors. With such contracts, doctors could face months of unemployment if they want to go elsewhere, or the prospect of relocating to take a different position.
The AMA has said noncompete agreements can be especially harmful to younger doctors and residents looking for better opportunities.
The American College of Emergency Physicians has pressed regulators to take more action to curb the use of non-compete agreements.
“Non-compete agreements limit the right of emergency physicians to freely practice medicine in their communities,” the ACEP said in a statement after the court ruling blocked the Biden administration’s regulations.
A few states, including California and Minnesota, have passed laws barring non-compete agreements. Some other states have passed measures in recent years placing more limits on non-compete agreements, according to the Economic Innovation Group.
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