Skip Navigation

House Bill Would Restrict Non-Compete Clauses in Health Care Employment Contracts

March 25, 2020

A bipartisan bill would limit the use of non-compete clauses in employment contracts, including an area where they’ve been under particular scrutiny: health care.

Employers use non-compete clauses to protect trade secrets. The clauses restrict where an employee can work after leaving a particular job.

H.R. 5710, introduced by Reps. Scott Peters (D-CA), Mike Gallagher (W-WI), and Anna Eshoo (D-CA), is companion legislation to the Workforce Mobility Act introduced by Sens. Todd Young (R-IN) and Chris Murphy (D-CT). The new House bill would require employers to notify employees of the limits of non-compete clauses and delegate enforcement of such clauses to the Federal Trade Commission and U.S. Labor Department.

Non-compete clauses for physicians and health care workers have come under particular criticism because of their potential to interfere with patient care. Non-competes may restrict where a physician, for example, can practice after leaving an organization, or where the physician can be reached by patients. Employees may be forced to sign the agreements as a condition of employment.

The legislation would prohibit non-compete clauses, with several exceptions. The rule wouldn’t apply under certain conditions, such as if it involved the sale of a business or partnership or there is an executive severance agreement in place. It would not preclude agreements prohibiting the sharing of trade secrets.

Free to Compete

Non-compete clauses have flourished over the years, according to the Economic Innovation Group (EIG), an advocacy group that promotes bipartisan ideas to “empower entrepreneurs and investors to forge a more dynamic American economy.”

According to its 2019 report, “The Use, Abuse, and Enforceability of Non-Compete and No-Poach Agreements,” non-compete clauses covered one out of every five labor force participants in 2014. 

“Given that these constraints prevent individuals from starting companies or taking better jobs in their chosen field, it is not difficult to see how the expansive use of these provisions could contribute to the observed declines in US. economic dynamism,” the report stated. 

In health care, such clauses could restrict physicians from exploring new health care delivery models such as  direct care, telehealth and home visits.

EIG commends the bill because, among other outcomes, it will spurn innovation.

“American workers should be free to compete in an open market,” stated John Lettieri, president and CEO of EIG.

 

AnneMarie Schieber (amschieber@heartland.org) is managing editor of Health Care News

 

Internet info:

H.R. 5710, Workforce Mobility Act of 2020:  https://www.congress.gov/bill/116th-congress/house-bill/5710/text?r=1&s=1

Starr, Evan, “The Use, Abuse, and Enforceability of Non-Compete and No-Poach Agreements,” Economic Innovation Group, February 2019:  (heartland TBA)

Author
AnneMarie Schieber is a research fellow at The Heartland Institute and managing editor of Health Care News, Heartland's monthly newspaper for health care reform.
amschieber@heartland.org @HCPolicy

Related News & Opinion View All News

Related Podcast