How Will Your Derm Practice Be Affected by the FTC Ban on Restrictive Covenants?

How Will Your Derm Practice Be Affected by the FTC Ban on Restrictive Covenants?

On April 23, 2024, the Federal Trade Commission voted 3-2 to ban noncompete agreements. The move has the potential to shake up the employment scene in dermatology practices across the country. 


The concerns surrounding noncompete agreements in healthcare have been mounting for years. President Biden's executive order in 2021 highlighted the need to address restrictive clauses that hinder workers' freedom of movement. The FTC's move to ban noncompetes aligns with this directive, aiming to create a more competitive and equitable environment.

Feedback on the ruling was overwhelmingly supportive, with a reported 25,000 out of the 26,000 comments received favoring the measure.

Employed dermatologists - as well as dermatology Physician Assistants and Nurse Practitioners - have shared compelling stories of how noncompetes have restricted their career growth and personal lives, forcing them to make tough choices like relocating or facing legal battles when pursuing new opportunities.

With this restriction lifted, dermatologists (as well as specialty-trained PAs and NPs) can now consider changing employers without the fear of being tied down by stringent contractual obligations. 

Dermatologist wearing scrubs but bound by a ball and chain

Potential Benefits

  • Increased Job Flexibility: Dermatologists will have more flexibility to pursue different career options which align with their needs.
  • Healthy Competition: Removing noncompete agreements can foster competition among dermatology practices, leading to better job offers and (potentially) improved working conditions for providers.
  • Reduced Burnout: By having the freedom to switch jobs more easily, healthcare workers may experience decreased burnout levels and improved overall well-being.

Potential Drawbacks

  • Legal Hurdles: Despite the potential benefits, the ban on noncompetes may face legal challenges from business groups, which could create uncertainty for healthcare workers.
  • Complex Transition: Adapting to this new regulatory landscape may pose challenges initially, requiring both employers and employees to navigate changes in contractual agreements.
  • Coverage Limitations: There are concerns about the ban's scope and its application to healthcare workers in nonprofit organizations, highlighting potential gaps in worker protection.

As we navigate these changes, it is essential to stay informed about the evolving regulations and seek clarity on how the ban on noncompete agreements will impact our individual career trajectories.

Legal Challenges Await

While this ruling is seen as a positive step towards enhancing job mobility for healthcare workers, it has also sparked opposition from business groups who are poised to contest the decision in court.

The dissenting commissioners' concerns about the FTC's authority to impose a broad ban on noncompetes raise questions about the legal implications of this ruling. Despite the potential benefits projected by the FTC, such as cost reductions and increased worker earnings, the road ahead is laden with legal hurdles that could impact the implementation of the ban.

The jurisdictional limitations acknowledged by FTC Commissioner Rebecca Slaughter regarding certain nonprofit healthcare employees underscore the complexities of extending the ban to all healthcare workers. Advocacy for legislative actions, such as the Workforce Mobility Act and the Freedom to Compete Act, reflects a broader commitment to addressing noncompete clauses that stifle professional mobility.

As the healthcare industry navigates the transition towards a future without noncompete agreements, it is essential to consider the challenges that lie ahead. The resistance from entities like the American Hospital Association and the uncertain legal terrain could potentially impact the enforcement and sustainability of the ban.

AAD/AMA Position

As of the time of this writing, the American Academy of Dermatology has not yet provided a position statement on the ruling.

The American Medical Association, however, has made efforts in the past to protect physicians employed by both for-profit and nonprofit healthcare entities. The AMA's House of Delegates has adopted policies supporting the prohibition of noncompete contracts for physicians working in hospitals, hospital systems, or staffing companies.

By advocating for limitations on noncompete agreements, the AMA aims to safeguard the autonomy and professional freedom of physicians, ensuring they can make informed career choices without facing unjust restrictions that impede their ability to provide quality healthcare.

Breaking the chain of restrictive covenants

What to Expect

Looking ahead, a major reversal of this decision would seem unlikely. That is, the era of restrictive covenants for most dermatology providers appears to be over.

However, all medical providers should perform their due diligence by confirming this new ruling's enforceability as it pertains to their own unique situation and circumstances. 

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