The Federal Trade Commission (FTC) voted in April to prohibit noncompete clauses for most U.S. workers, including physicians. The new rule will take effect on September 4, making it illegal to include noncompetes in contracts and requiring employers to inform workers that such clauses are void. The FTC estimates the final rule will lead to 8,500 new businesses and a $194 billion decline in healthcare costs. An estimated 30 million Americans are subject to a noncompete. Existing noncompetes will only be enforceable for senior executives.
This move could impact the contracts of employed physicians, with an estimated 35% to 45% currently bound by noncompete clauses, according to the American Medical Association. At the state level, physicians in several states have been advocating for noncompete policy reforms or bans.
The ban on noncompete clauses for physicians has the potential to allow doctors to practice more freely. These clauses typically restrict physicians from practicing within a certain radius of their former workplace for a specified period, potentially impeding patients’ access to healthcare services. Removing these constraints can enable physicians to relocate to underserved areas, improving medical access and quality of care.
Here are the pros and cons for both dermatologists and dermatology practices in light of the ban on noncompetes:
Dermatologists
Pros:
1. Increased Mobility: Dermatologists will have more freedom to explore different job opportunities and locations without being bound by noncompete agreements.
2. Career Flexibility: Dermatologists can pursue entrepreneurial ventures, such as starting their own practices or clinics, without restrictions.
3. Negotiating Power: With the ability to move more freely between practices, dermatologists may have increased leverage in negotiating higher salaries and better employment terms.
4. Professional Growth: The removal of noncompete agreements may encourage dermatologists to seek out new challenges and opportunities for career advancement.
Cons:
1. Intensified Competition: Dermatologists may face heightened competition as more professionals enter the market, potentially leading to oversaturation in certain areas.
2. Salary Instability: Without noncompete agreements, dermatologists at larger practices may experience pressure on their salaries as practices may be less inclined to offer long-term contracts.
3. Loss of Job Security: The absence of noncompete agreements could result in less job security for dermatologists, especially if practices experience high turnover rates.
4. Increased Legal Complexity: Dermatologists may need to navigate legal complexities when transitioning between practices, especially regarding patient records, intellectual property and contractual obligations.
Dermatology Practices
Pros:
1. Attracting Talent: Dermatology practices may find it easier to attract and retain top talent without the constraints of noncompete agreements, leading to a more dynamic and skilled workforce.
2. Innovation and Collaboration: The removal of noncompete agreements could foster innovation and collaboration among dermatologists within and across practices, benefiting the overall quality of care.
3. Cost Savings: Practices may experience cost savings by not having to enforce or litigate noncompete agreements, potentially leading to more efficient operations.
4. Adaptability: Dermatology practices can adapt more easily to changes in the workforce and market dynamics, allowing for more strategic planning and flexibility in staffing.
Cons:
1. Increased Turnover: Practices may face higher turnover rates as dermatologists have the freedom to move to competing practices or start their own ventures.
2. Loss of Competitive Edge: Without noncompete agreements, practices may lose their competitive advantage in retaining talent and protecting their patient base.
3. Legal Risks: Practices may be exposed to legal risks if departing dermatologists compete directly with their former employers, leading to potential disputes and conflicts.
4. Market Saturation: The removal of noncompete agreements could contribute to market saturation in certain regions, leading to intensified competition among practices for patients and talent.
The U.S. Chamber of Commerce and other parties have signaled their intent to challenge the ban in court. Dermatologists and dermatology practices should consult legal counsel when engaging in employment contracts to ensure legal and regulatory compliance.
