A large swath of the healthcare sector may be exempt from the federal government’s proposal to ban noncompete arrangements in employment contracts. Whether this will apply to nonprofit hospitals — which make up half of all the hospitals in the U.S. — isn’t clear, legal experts say.
In a sweeping proposal released Jan. 5, the Federal Trade Commission said noncompete clauses depress worker wages and limit competition. The agency’s proposal would bar future noncompetes and also invalidate existing ones, Healthcare Dive reports.
The FTC’s proposal is poised to alter the healthcare sector, which frequently relies on restrictive covenants to retain physicians and the patients they treat.
A plain reading of the proposal would suggest that nonprofit organizations are exempt from the draft rule seeking to ban restrictive covenants in employment contracts.
An entity not “organized to carry on business for its own profit or that of its members” is exempt from the rule seeking to ban noncompetes, according to the proposal.
The language also comes from the FTC Act, which gives the agency authority to police unfair competition. Still, the conduct of nonprofits typically falls outside of the FTC’s jurisdiction. Read more.
