President Joe Biden signed an executive order July 9 encouraging the Federal Trade Commission to limit or ban noncompete agreements.
Eight takeaways for ASC execs:
1. The federal government estimated around half of private sector businesses have noncompete agreements as part of employee contracts for around 36 million to 60 million workers, including many physicians and healthcare workers.
2. Limiting or eliminating noncompete agreements would make it easier for physicians to leave hospital employment for ASC ownership in the same community. However, it would also increase competition between surgery centers to attract and retain top surgeons and staff because the centers wouldn't be able to enforce their own noncompete agreements.
3. The Biden administration hopes the executive order will raise wages by promoting competition between employers. The executive order says the noncompete agreements cost American households $5,000 per year by causing lower wages and less competition.
4. Lina Khan, FTC chair, has argued against noncompete agreements that reduce competition, according to NPR, making it likely she could move forward with the executive order's request. She wrote in a 2019 article that noncompete agreements may keep employees from changing jobs and reduce their bargaining power.
5. An FTC ban on noncompete agreements would benefit low-wage workers and high-skilled workers such as physicians and other healthcare professionals, Evan Starr, PhD, a University of Maryland economist, told NPR. In recent years, courts in Texas and Iowa have ruled in favor of ASCs when enforcing noncompete agreements that require physicians bring cases to one particular center.
6. Noncompete agreements protect employers' trade secrets, including strategic plans and patient or client contact information lists. Without the noncompete agreements, former employees may be able to share that information with their new employers, Carson Sullivan, partner of employment law practice Paul Hastings, told Forbes.
7. The Biden administration also encouraged the FTC and DOJ to boost antitrust guidance that prevents employers from sharing information about pay and benefits to suppress wages. The Justice Department is investigating claims that large ASC companies colluded to suppress senior-level employee wages from 2010 to 2017.
8. The executive order could increase employee poaching between competitors, according to the Forbes article, including ASC companies, medical device companies and medical practices. It is common for mid-level and senior executives from these industries to exit one company for another.