A Requiem for the FTC Non-Compete Regulation
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Colleagues:
For those who were in favor of the recent FTC Regulation that banned most non-compete clauses in employment agreements, there was unwelcome news this week. A federal district court judge in Texas ruled that the FTC did not have the regulatory authority to create and enforce the regulation, thus nullifying it. Since this ruling is unlikely to be reversed by any higher courts, attempts to ban non-compete clauses must now focus on a legislative approach.
Now is a suitable time to review where MSSNY stands. These non-compete provisions are highly disruptive to patient care by prohibiting continuity of care for patients treated by these physicians if the physician leaves employment or affiliation with that health system. At a time when we face physician work force shortages, the impact on the affected patients treated by these physicians is significant and adverse. The continuity of care for patients is lost when the physician is forced to leave the immediate practice area. These pernicious contract provisions also adversely impact patient care by, in effect, preventing physicians from leaving adverse employment circumstances even if they are concerned by excessive corporate interference with their clinical judgment.
Indeed, the Medical Society of the State of New York has adopted a nuanced approach that calls for legislation to prohibit non-compete agreements imposed by hospitals, health systems and Management Service Organizations on their employed or affiliated physicians. However, consistent with our policy, MSSNY also has advocated exempting small practices in non-shortage areas from prohibition of non-compete agreements. In these situations, the negative impact on a group losing a physician can be significant, particularly when the group has invested significant human and financial resources to train and expand business of an inexperienced physician hired right after residency training.
The NYS Legislature passed a bill on this matter last year, but the Governor did not sign it. The chief sponsors of this bill (particularly Senator Ryan from Buffalo and Assemblymember Bronson from Rochester) were waiting to see what the federal courts did with this FTC proposal. Now that it has been thrown out, MSSNY is anticipating that the sponsors will be making another big push for enactment of a state law in next year’s Legislative Session.
As always, your MSSNY will be there in Albany advocating for you.
All the best,
Jerome C. Cohen, MD
MSSNY President
