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What Would Medicine Look Like Without Noncompete Clauses?

Noncompete clauses are rampant in medicine. They are the norm. However, the Federal Trade Commission just passed a ban on noncompete clauses in the workplace. This would have a major impact on the entire labor market. In my mind, the impact would be even more outsized for physicians. Some of the technical aspects were discussed in this post. But then the idea and topic seemed to fade away.

I don’t think it should.

So, I think it’s a really useful and interesting topic to dig into. So, away we dig.

How do noncompete clauses work in medicine?

Like I said above, noncompete clauses are certainly the norm in medicine. Far and away the majority of doctors that I speak with have some form of noncompete clause in their contract.

And these noncompete clauses, also called restrictive covenants, essentially say that if/when a doctor leaves their current position, they cannot work within a certain radius over a certain time period.

noncompete clause medicine

The advantage for employers is that if their employees leave, they can’t become the immediate competition. This is a clear advantage.

The advantage for the employees/partners under the restrictive covenant are…well, I can’t really think of any.

But are the noncompete clauses enforceable?

This is always the next question that follows when I talk about noncompete clauses. Are they enforceable? And the answer is sometimes.

However, the more important question is: Does it matter if it is enforceable? And the insert to that in my mind is a resounding no.

In legal terms, restrictive covenants range from being non-enforceable to sometimes enforceable to completely enforceable depending on the state you are in. But, even in states where they are legally non-enforceable, they still show up in contracts. Why? Because, they are still a deterrent to employees leaving. They still usually require some sort of arbitration to solve when there is a split. And this cost, time, money, and headaches.

So, noncompete clauses are at best an expensive nuisance and at worst a major restriction on your ability to practice medicine.

Not good either way.

My thoughts on dealing with restrictive covenants in your contract

I’ve discussed my contract in depth here. And those of you who have reviewed it may remember that I negotiated not to have a noncompete clause in my contract.

This was so important to me as I was moving home to Buffalo, NY. If my first job didn’t work out – and it has! – I didn’t want to be restricted from working in my hometown and either deciding to move away or have a massive commute.

Most positions will say that a noncompete clause is non-negotiable. But remember, everything is negotiable! You can negotiate other areas of your contract – even reduced pay – to eliminate the clauses. You can also reduce the terms – the length and/or radius of restriction – of the covenant.

Lastly, you can negotiable a buy out for your non-compete clause. I recommend doing this beforehand when initially negotiating the contract so you still have some leverage.

But this would all be moot if the FTC passes a ban on noncompete clauses…

What did the FTC propose?

It’s pretty simple. Their proposal would ban noncompete clauses everywhere – in medicine and outside of medicine.

Their argument is that restrictive covenants violate a greater than 100 year old law prohibiting unfair methods of competition, calling the practice exploitative.

Fair enough.

What would medicine look like without noncompete clauses?

I believe that it would look better.

Am I biased? Oh yeah, you betcha. But here is why I think this.

Happy doctors are better doctors. I experienced this myself. We provide better patient care when we are fulfilled, happy, and like our jobs. This is especially true because these conditions allow us to focus wholly on patient care.

Some doctors find these conditions. I feel I am one of the lucky ones to currently experience this. And a lot of that has to do with the 6 steps I took to find my job. But that is another story.

The reality is that many, maybe most, doctors do not consistently find this in their work

Especially in their first job. This can be for a variety of reasons. Maybe it’s just not a good fit. Maybe the environment is malignant. And maybe the clinical responsibilities/scope are just not what you expected.

Regardless, these factors lead to dissatisfaction. Which leads your focus away from medicine. And you suffer personally, professionally, and mentally. Burnout often ensues if things don’t change.

So, you look to change your situation. But ah! There is a roadblock. A noncompete clause. Now, in order to improve yourself and your patient care, you are required to accept limits on your search for a better fit or an expensive and lengthy fight to practice medicine on your terms. Neither of those is good. For you, your patients, or even the institution in my opinion.

So, a medical world without noncompete clauses is much better for doctors. Which is better for patients.

But wait there’s more…

The reason that hospital systems and practices and institutions and workplaces in general like noncompete clauses is that it keeps salaries down.

“Don’t like what we are paying you? Too bad. Take it or ship out and good luck finding another practice.”

Without noncompete clauses, employers and practices would have to make their positions more attractive to hire and maintain good employees.

Their concern is obviously that this would increase costs and would impede their ability to function as a healthcare institution. But I call bologna (baloney?).

What do doctors think about eliminating noncompete clauses?

Uhhh…we like the idea. A lot.

When this news initially came out, I ran an informal poll on Instagram. Over 85% of respondents were supportive of the idea. Some were against. Although I will admit that my one friend who is a hospital administrator unsurprisingly voted “nay,” upping the dissenting percentage.

So, will this proposal ever pass?

I’m dubious at best.

Just from a point of realism, I think there is a slim chance that this ultimately goes into effect at any point. Without getting political, our whole social system leans heavily on the capitalist side. And noncompete clauses strike as a very capitalist practice. It helps keep businesses lean, offering them an advantage in the labor market.

And the entities that this practice helps have very loud voices in Washington.

As one member of the Facebook group very correctly pointed out, you can bet that “big healthcare” will be campaigning against these changes.

So, as physicians, we need to amplify our voice as well. There are online campaigns here or ask your medical society how you can get involved.

What can doctors do to deal with non-compete clauses until something changes?

Remember, I am a firm believer that a nation of financially free doctors can change medicine for the better in incredible ways – at least 9 of which I share here!

What do you think? Are noncompete clauses good or bad for doctors? Do you this this proposal will pass? Why or why not? Let me know in the comments below!

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    Jordan Frey MD, a plastic surgeon in Buffalo, NY, is one of the fastest-growing physician finance bloggers in the world. See how he went from financially clueless to increasing his net worth by $1M in 1 year and how you can do the same! Feel free to send Jordan a message at [email protected].

    1 thought on “What Would Medicine Look Like Without Noncompete Clauses?”

    1. One important point about the FTC policy proposal is that it doesn’t apply to nonprofit organizations, and most major health care systems are nonprofits. It will only affect for profit hospitals and private physician practices as the FTC does not have jurisdiction over nonprofit entities.

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