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Is there ever a good non-compete? Today we explore.


  📍 Today in health, it, the FTC strikes down. Non-compete agreements and the aha, isn't happy today. We're going to look at that. My name is bill Russell. I'm a former CIO for a 16 hospital system and creator of this week health. So channels and events dedicated, transform healthcare, one connection at a time. We want to thank our show sponsors who are investing in developing the next generation of health leaders.

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We'll start with the FTC story. I'm going to pull this one from NPR, federal trade commission, narrowly voted Tuesday to ban nearly all non-competes employment agreements that typically prevent workers from joining competing businesses or launching ones of their own. The FTC received. More than 26,000 public comments in the months leading up to the vote. Chair, Lina Khan referenced on Tuesdays.

Some of the stories. She had heard from workers. We heard from employees who, because of non-competes were stuck in abusive workplaces. She said one person noted when an employer merged with an organization that whose religious principles conflicted with their own a non-compete kept the worker locked in place and unable to freely switch. To a job that didn't conflict with their religious practices, these accounts, she said pointed to a basic reality of how robbing people of their economic Liberty also robs them of all sorts of freedoms. The FTC estimates about 30 million people or one in five American workers from minimum wage earners to CEO's are bound by non-competes. It says the policy change could lead to increase wages totally nearly 300 billion per year by encouraging people to swap jobs freely, the ban, which will take effect later this year, carves out the exception for existing non-competes that companies have given their senior executives on the grounds that these agreements are more likely to have been negotiated.

The FTC says employers should not enforce other existing non-compete agreements. The vote was three to two along party lines. So as you would imagine. Okay. So that's the background, that's what you need to know. And clearly there's going to be. There's going to be some opposition to this.

There's going to be a lot of discussion around this. The first one we're going to discuss is in a Becker's article, hospitals slam FTCs non-compete band. And I will save you. Let's see. All right here, let's start here. The federal trade commission on April 23rd, voted three to two to band non-compete agreements and a move at estimates will save up to 194 billion. In healthcare costs over the next decade. Though the FTC recognized at it does not have jurisdiction over nonprofit entities.

They reserved the right to evaluate an entities, nonprofit status, which would include a significant portion of the us hospitals. Specifically the agency said that some portion of the 58% of hospitals, that claim tax-exempt status. As nonprofits and the 19% of hospitals that are identified. As state and local government hospitals in the data cited by the. Aha.

American hospital association likely fall under the commission's jurisdiction. And the final rules purview, the final rule would have significant implications for the healthcare industry. And has been described by Federation of American hospital, president and CEO chip Kahn. As a double whammy against hospitals, the band makes it more difficult to recruit and retain. Caregivers to care for patients. While at the same time, creating an anti-competitive unlevel playing field between taxpaying and tax exempt hospitals. A result, the FTC. Rule precisely intended to prevent.

Mr. Khan said in a statement shared with Becker's any time of constant healthcare workforce shortages, the FTCs vote today threatens access to high quality care for millions of patients. About 18% of the us workforce or 30 million people is covered by non-compete. Agreements. We covered that already.

Skip that non-compete clauses, keep wages low, suppress new ideas and Rob American economy of dynamism. Including more than the more than 8,500 new startups. That would be created a year. Once non-competes are banned FTC chair. Lina Khan said. In the news release, the FTC expects funnel roll to drive innovation. Let's see in the U S economy overall, the FTC projects that banning non-competes will drive 2.7% growth in the U S economy.

The H a at urged, the FTC to withdraw the non-compete ban or exempt the hospital field amid staffing shortages that are projected to affect hospitals and health systems. Far beyond the pandemic. It also argued. That the agency aired by seeking to create a one size fits all rule for employees across all industries.

The agency's stubborn insistence on issuing this sweeping rule, despite mountains of contrary legal precedent and evidence about its adverse impacts on the health care market. As further proof that the agency has little regard for its place in our constitutional order. H general counsel Chad Golder said in a, an April 23rd statement shared with Becker's. Three unelected officials should not be permitted to regulate the entire us economy. And stretch their authority far beyond what Congress had granted. Including by claiming the power to regulate certain tax exempt nonprofit organizations.

The aha added that in its estimation, the only saving grace is that the rule will likely be short-lived with courts expected to weigh in on the rule before it can do damage to hospital's ability to care for their patients or communities. The U S chamber of commerce has indicated that it will challenge the role.

The FTC said it has received more than 26,000 comments, which we covered for. And you can read the 570 page rule. Right here on a link on the Becker's article. All right. So what's the, so what we haven't done this in a while. I usually end each story with a, so what the, so what is, this is a big deal. It's a big deal for healthcare.

It's a big deal for for anyone. Who is in business. It is very difficult to operate without the ability to put non-competes in place, because it. To a certain extent when you bring somebody in as an employee, you can reveal. You almost have to reveal the inner workings of your company. You have to reveal a whole bunch of things to that effect.

So I understand why non-competes are in place. So if you reveal. Like the secrets of your company and that person can leave tomorrow and start a new company and compete against you. It doesn't. The hiring process becomes very. Difficult in that scenario. All right. That's just in normal business. In healthcare. I, I think the FTC did overreach here.

I think there was an obvious. There was an obvious. Distinction and you saw it in the Becker's article. Or they said, the one, one rule, one size fits all rule is not what was needed here. And it's absolutely not what was needed here. And I agree that, we shouldn't lock all employees.

If you're signing on to be a minimum wage employee, there's a good chance that you're not getting access to company secrets and those kinds of things, those kinds of non-competes are silly. And I think an egregious use of power by the business owners. On the other hand, I think there's effective uses of non-competes amongst the executive ranks. That need to, be adhered to and I think they're right in saying that a lot of those are negotiated when you signed on as a, at a certain level within an organization. You will sign, you will essentially say, look, I'll sign that non-compete but if you're going to give me the noncompete, I want an extra bonus.

I want more compensation. I want, because it locks me up. That stuff happens all the time at the executive level. There's no reason to strike those down. In fact, it's almost hurtful. It's damaging to the economy to strike those things down. But I agree that there's nuance in this one size fits all is probably the problem. With what had happened here and they needed a role that was more nuanced and took into account the different. Types of situations that people were facing. What's the, so what, where you live keep an eye on this.

It's a big deal. If it stays into effect, if it doesn't stay into a fact, it's not that big of deal. I cover the story, not to give you any massive insight. I covered the story more to just make sure that you're aware of it. It's something that people will be talking about. People might have the wrong perception if they don't stay up to date on this.

Because again, this will be challenged and it will likely change the FTC in this case, likely did overstep their bounds. We'll see how the trans how it transpires as we go forward. That's all for today. Don't forget to share this podcast with a friend or colleague.

You said as a foundation for mentoring, we want to thank our channel sponsors. In fact, if you're mentoring, somebody ask them what's the effective use of the noncompete. Would you sign a non-compete. In what cases would you sign a noncompete? Just some questions. If you're listening to this with with a friend or colleague or someone you're mentoring, those are some questions that you might ask. Anyway, here we go.

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