BILLINGS — The Federal Trade Commission issued a rule Tuesday to ban a corporate practice that prevents employees from jumping to work for competitors, known as noncompete clauses.
In Montana, the new rule impacts many industries, especially healthcare, because it means more freedom for doctors and physicians to change jobs across the country and here in Billings.
Dr. Eric Arzubi of Frontier Psychiatry in Billings said that patients don't usually realize that most doctors are under rigid noncompete clauses.
“If you were to leave the organization, you could only practice medicine if you delivered care outside of that area. So you’ll see some specialists who actually end up leaving this area or the state and so we lose a lot of great providers,” Arzubi said at Frontier Psychiatry Wednesday.
He's been on both sides of the spectrum as an employee and as an employer.
“When I hire people, they will tell me, look I’ve got this noncompete, I’m a little scared to leave because I don’t know if I’m going to get sued, if it’s going to affect me,” added Arzubi.
This will no longer be the case if the FTC's rule is put into place as scheduled in August, affecting 30 million employees in America's workforce. Multiple employer groups have filed lawsuits to block the new rule.
“What’s going to happen, which I think is a great thing, is healthcare organizations have to compete by paying fairly and providing a great workplace culture,” Arzubi said.
It's not without pushback.
“The American Hospital Association is actually against removing these noncompete clauses. Their argument is going to be, well, it’s actually good to have these in place because that way we can retain physicians,” he added.
The U.S. Chamber of Commerce has already filed a lawsuit against the FTC, alleging that the agency lacks the power to adopt sweeping rules like the ban.
“I assume that the hospital (lobbyists) are going to fight it pretty hard so I imagine in the next few months we’ll be hearing more about this,” said Arzubi.
In Billings, officials at Billings Clinic said they expected the FTC action and will follow the new law.
"We don’t anticipate this rule will have a significant effect on our staffing or operations," the hospital said in a statement.
St. Vincent Healthcare officials said they are assessing the potential impact of the new rule.
The FTC estimates that banning noncompetes will lead to an annual 2.7% growth in new business formation, which equals out to 8,500 new businesses per year.
“If you do have a group of docs or a doc that works for a bigger healthcare organization, there’s fewer barriers now to them leaving and then starting their own thing,” Arzubi added.
“If we really believe in the free markets as a driver of quality and lower costs. This is actually improving the efficiency of the marketplace cuz now there’s competition for the workforce,” he said.
