Executive action on non-competes

[GravelRider]

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I was going to post this in the other thread where this topic was brought up, but I felt that it warranted it’s own discussion.

FACT SHEET: Executive Order on Promoting Competition in the American Economy | The White House

The economy is booming under President Biden’s leadership. The economy has gained more than three million jobs since the President took office—the most

www.whitehouse.gov

So regarding the executive action on non-competes, the language is as follows:
“Encourages the FTC to ban or limit non-compete agreements.”

So functionally, how does this play out? Many people still have non-competes in their contract. Does the power of them disappear? I still think employers will try to enforce them. Is it up to the employee to file a complaint with the FTC? Will the FTC be inundated with thousands of non-compete cases to look at? Will judges just throw out these cases now?

Most non-competes that affect us are probably not enforceable, but the very threat of having to hire a lawyer and deal with them in court is enough to discourage most from fighting them. Does this change that? Count me as hopeful, but skeptical that this actually changes anything.

 

[abolt18]

I was going to post this in the other thread where this topic was brought up, but I felt that it warranted it’s own discussion.

FACT SHEET: Executive Order on Promoting Competition in the American Economy | The White House

The economy is booming under President Biden’s leadership. The economy has gained more than three million jobs since the President took office—the most

www.whitehouse.gov

So regarding the executive action on non-competes, the language is as follows:
“Encourages the FTC to ban or limit non-compete agreements.”

So functionally, how does this play out? Many people still have non-competes in their contract. Does the power of them disappear? I still think employers will try to enforce them. Is it up to the employee to file a complaint with the FTC? Will the FTC be inundated with thousands of non-compete cases to look at? Will judges just throw out these cases now?

Most non-competes that affect us are probably not enforceable, but the very threat of having to hire a lawyer and deal with them in court is enough to discourage most from fighting them. Does this change that? Count me as hopeful, but skeptical that this actually changes anything.

Don't you worry. I'm sure there are plenty of hospital-paid lobbyists working hard to ensure that physicians' non-competes are exempt from this legislation.

 

[GravelRider]

Don't you worry. I'm sure there are plenty of hospital-paid lobbyists working hard to ensure that physicians' non-competes are exempt from this legislation.

Well, it’s not legislation. It’s an executive action and I’m wondering what that exactly means. How does something like this function? Can we all just assume our non-competes are non-binding now or will there be some sort of appeals process.

I also think there are different “flavors” of non-competes in medicine. It’s one thing if I’m a cardiologist and I spend 5 years building a name for myself and a list of patients under the financial support of a large institution. Then I decide to up and leave and open a practice down the road and take all my patients with me. That’s a little different than an employed anesthesiologist who is looking for a job with a employer down the road who happens to be paying a little more. These are the nuances that aren’t captured in a general statement, so I’m wondering if there are any thoughts on what this could mean for anesthesiologists.

 

[NicMouse64]

Well, it’s not legislation. It’s an executive action and I’m wondering what that exactly means. How does something like this function? Can we all just assume our non-competes are non-binding now or will there be some sort of appeals process.

I also think there are different “flavors” of non-competes in medicine. It’s one thing if I’m a cardiologist and I spend 5 years building a name for myself and a list of patients under the financial support of a large institution. Then I decide to up and leave and open a practice down the road and take all my patients with me. That’s a little different than an employed anesthesiologist who is looking for a job with a employer down the road who happens to be paying a little more. These are the nuances that aren’t captured in a general statement, so I’m wondering if there are any thoughts on what this could mean for anesthesiologists.

I imagine cases would get dismissed instead of litigated so may not be necessary to go through the whole trial process. At least this is according to my lawyer friend.

 

[deleted162650]

Can an executive order nullify pre-existing contracts, or would that be considered an “ex post facto” law?

 

[drmwvr]

4 words: Come And Get Me....

 

[GassYous]

I'm just glad with all

Can an executive order nullify pre-existing contracts, or would that be considered an “ex post facto” law?

Isn't that what they did to get rid of student loan interest and to delay payments for rent

 

[Mman]

Can an executive order nullify pre-existing contracts, or would that be considered an “ex post facto” law?

the order wouldn't nullify it, but how agencies choose to interpret it could undo them

 

[deleted126335]

the order wouldn't nullify it, but how agencies choose to interpret it could undo them

True. The problem is that so many entities rely heavily on them, that they would challenge any decision by the FTC to weaken them. Absent legislation enacted by Congress, an executive order acted on by FTC would be litigated for years.

 

[BLADEMDA]

I would think that for many of us who don't really compete with our employer the executive action would really weaken a lawsuit by your current employer against you.

You don't control any patients and if you opted to go work for the hospital down the street a judge is highly unlikely to see that as competition when all you do is provide a service which is easily replaceable. The point of the non compete is to "keep wages low" which is exactly why it won't hold up. If the non compete was actually to prevent you from stealing patients or disclosing trade secrets then maybe the employer has a case. I am highly doubtful the AMC/hospital would take you to court knowing the executive action is in place.

 

[pgg]

I am highly doubtful the AMC/hospital would take you to court knowing the executive action is in place.

I don't know about that. Big institutions have lawyers on staff. Legal fees are a recurring line item in their budgets. They're a sunk cost. I would never underestimate the kind of losing fights some belligerent jerk with an idle lawyer on retainer will pick. They'll use them if for no other reason than to intimidate people into submission.

More power to the guy who wants to be the first test case though. 🙂

 

[NicMouse64]

I don't know about that. Big institutions have lawyers on staff. Legal fees are a recurring line item in their budgets. They're a sunk cost. I would never underestimate the kind of losing fights some belligerent jerk with an idle lawyer on retainer will pick. They'll use them if for no other reason than to intimidate people into submission.

More power to the guy who wants to be the first test case though. 🙂

Keep a lawyer friend nearby, just in case.....

 

[GravelRider]

I was talking to a lawyer friend about this today and while this is not his area of expertise, he thinks that the main intent of this action is to protect blue-collar workers from these non-compete agreements. However, he does think that if you do violate a previously written non-compete clause and your former employer takes you to court over it, the burden of proof that you stole trade secrets (which is the intent of the agreements) will shift to your former employer…even in states that notoriously enforce these agreements. This may dissuade smaller practices from trying to enforce these agreements, but not likely to stop large hospitals and companies that keep a team of lawyers penned up and ready to strike from going after you.

The downstream effects may be more significant in that new contracts may be written with more reasonable non-compete restrictions in place and state legislatures may take it as a signal to write more specific legislation guiding these clauses.

We shall see. Hopefully we get some real-world testers in the coming months.

 

[Obnoxious Dad]

I was going to post this in the other thread where this topic was brought up, but I felt that it warranted it’s own discussion.

FACT SHEET: Executive Order on Promoting Competition in the American Economy | The White House

The economy is booming under President Biden’s leadership. The economy has gained more than three million jobs since the President took office—the most

www.whitehouse.gov

So regarding the executive action on non-competes, the language is as follows:
“Encourages the FTC to ban or limit non-compete agreements.”

So functionally, how does this play out? Many people still have non-competes in their contract. Does the power of them disappear? I still think employers will try to enforce them. Is it up to the employee to file a complaint with the FTC? Will the FTC be inundated with thousands of non-compete cases to look at? Will judges just throw out these cases now?

Most non-competes that affect us are probably not enforceable, but the very threat of having to hire a lawyer and deal with them in court is enough to discourage most from fighting them. Does this change that? Count me as hopeful, but skeptical that this actually changes anything.

Here is a link to an FTC document that briefly outlines that agency's rule making and enforcement authority.

A Brief Overview of the Federal Trade Commission's Investigative, Law Enforcement, and Rulemaking Authority

Revised, May 2021

www.ftc.gov

It seems to me that the FTC could promulgate a rule banning the enforcement of covenants not to compete in the physician job market. This, of course, would open an enormous can of worms. What about instances where a physician has already collected a fat chunk of money to sell a practice with the understanding that he or she would never compete against the sold practice?

I would personally be very happy to see the nullification of covenants not to compete. Here is a very good piece on the deleterious economic effects of covenants not to compete.

https://digitalcommons.law.umaryland.edu/cgi/viewcontent.cgi?article=1198&context=fac_pubs

 

[Airway]

I would think that for many of us who don't really compete with our employer the executive action would really weaken a lawsuit by your current employer against you.

You don't control any patients and if you opted to go work for the hospital down the street a judge is highly unlikely to see that as competition when all you do is provide a service which is easily replaceable. The point of the non compete is to "keep wages low" which is exactly why it won't hold up. If the non compete was actually to prevent you from stealing patients or disclosing trade secrets then maybe the employer has a case. I am highly doubtful the AMC/hospital would take you to court knowing the executive action is in place.

Large academic university programs have threatened anesthesiologists. Even if you can win it costs $$$ & time to do so.

 

[ProRealDoc]

How Biden’s Proposed Ban On Non-Compete Agreements Would Impact Companies

President Joe Biden signed an executive order which, among other things, seeks to ban or limit worker non-compete agreements that companies rely on to help protect their legitimate business interests. The ban could create a crisis for many corporate executvies,

www.forbes.com

 

[Aether2000]

Restrictive covenants are covered by state law, not federal law. The action is more symbolic than anything since the FTC has no authority to override state legislatures on the basis of an executive action in lieu of federal legislation.

 

[Obnoxious Dad]

Restrictive covenants are covered by state law, not federal law. The action is more symbolic than anything since the FTC has no authority to override state legislatures on the basis of an executive action in lieu of federal legislation.

I beg to differ. The Federal Trade Commission is the offspring of the U.S. Congress and it has broad powers to regulate practices that are unfair to consumers. Persuasive arguments can be made that covenants not to compete stifle competition in the healthcare market. See this from Jones Day:

"The Federal Trade Commission Act regulates fair commercial practices for consumers. In particular, the Act prohibits "unfair or deceptive acts or practices in or affecting [interstate] commerce." (15 U.S.C. § 45(a)(1).) Under the Act, the Federal Trade Commission (FTC) has the authority to define a practice as unfair if it "causes or is likely to cause substantial injury to consumers which is not reasonably avoidable by consumers themselves and not outweighed by countervailing benefits to consumers or to competition." (15 U.S.C. § 45👎.) The FTC has issued numerous guides interpreting the prohibition on unfair or deceptive acts in the context of different industries and practices (16 C.F.R. § 17 et seq.). Many of these guidelines are very specific. For example, 16 C.F.R. § 24.3 addresses when leather and imitation leather products may be defined as waterproof."

file:///C:/Users/Owner/Downloads/Consumer%20contracts%20QAndA%20United%20States.pdf

 

[nimbus]

How Biden’s Proposed Ban On Non-Compete Agreements Would Impact Companies

President Joe Biden signed an executive order which, among other things, seeks to ban or limit worker non-compete agreements that companies rely on to help protect their legitimate business interests. The ban could create a crisis for many corporate executvies,

www.forbes.com

Those arguments are largely irrelevant for doctors since there are no “trade secrets” or “secret formulas” in the practice of medicine.

 

[vector2]

file:///C:/Users/Owner/Downloads/Consumer%20contracts%20QAndA%20United%20States.pdf

 

[deleted126335]

Those arguments are largely irrelevant for doctors since there are no “trade secrets” or “secret formulas” in the practice of medicine.

I am sure that an attorney representing an AMC or hospital that employs physicians might see things differently. These ****ers spend most of their time trying to come up with multiple “reasonable” interpretations of facts and laws and arguments to support them.

 

[nimbus]

The non compete order is part of a larger package to promote competition. A step in the right direction against runaway consolidation and oligopolies.

President Signs Executive Order to Promote Economic Competition | AHA

President Biden today signed an executive order (EO) establishing a “whole-of-government” effort to promote competition in the American economy. The EO includes 72 initiatives by more than a dozen federal agencies to tackle competition issues across the economy, including in health care...

www.aha.org

 

[deleted126335]

The non compete order is part of a larger package to promote competition. A step in the right direction against runaway consolidation and oligopolies.

President Signs Executive Order to Promote Economic Competition | AHA

President Biden today signed an executive order (EO) establishing a “whole-of-government” effort to promote competition in the American economy. The EO includes 72 initiatives by more than a dozen federal agencies to tackle competition issues across the economy, including in health care...

www.aha.org

Yes. But does it actually matter to the individual doc who wants out of a non compete tomorrow and is worried about the consequences of ignoring it?

 

[Zekchar]

Yes. But does it actually matter to the individual doc who wants out of a non compete tomorrow and is worried about the consequences of ignoring it?

It will take several trial cases to establish a new precedent, but hopefully the answer is yes.

 

[nimbus]

What ending noncompetes means for ASCs, physicians: 8 notes - Becker’s ASC

President Joe Biden signed an executive order July 9 encouraging the Federal Trade Commission to limit or ban noncompete agreements.

www.beckersasc.com

 

[sevo00]

What ending noncompetes means for ASCs, physicians: 8 notes - Becker’s ASC

President Joe Biden signed an executive order July 9 encouraging the Federal Trade Commission to limit or ban noncompete agreements.

www.beckersasc.com

For those working for AMCs with non competes that have been itching to leave, I recommend bringing this news to your admin. If they want to keep you they better start dishing out those retention bonuses…

 

[deleted126335]

For those working for AMCs with non competes that have been itching to leave, I recommend bringing this news to your admin. If they want to keep you they better start dishing out those retention bonuses…

I guarantee you that the folks who negotiate contracts with physicians are already reaching out to their corporate counsel and doing the math on their options.

 

[Aether2000]

"The Federal Trade Commission Act regulates fair commercial practices for consumers. In particular, the Act prohibits "unfair or deceptive acts or practices in or affecting [interstate] commerce." (15 U.S.C. § 45(a)(1).)" Applying this standard to anesthesiologists, hospitals or patients is not germane given that non-competes generally only affect the primary locations of practice that are not "interstate". Some larger AMCs do attempt to over-reach across state lines with their non-competes, and hopefully those can be struck down by an executive action. However non-competes and other restrictive covenants will not be held as illegal until resolved by the US Supreme Court. (try 20 years from now)

 

[bronx43]

"The Federal Trade Commission Act regulates fair commercial practices for consumers. In particular, the Act prohibits "unfair or deceptive acts or practices in or affecting [interstate] commerce." (15 U.S.C. § 45(a)(1).)" Applying this standard to anesthesiologists, hospitals or patients is not germane given that non-competes generally only affect the primary locations of practice that are not "interstate". Some larger AMCs do attempt to over-reach across state lines with their non-competes, and hopefully those can be struck down by an executive action. However non-competes and other restrictive covenants will not be held as illegal until resolved by the US Supreme Court. (try 20 years from now)

Where is this from? The new EO didn’t specify interstate noncompetes.