The Big Story: Nonprofit hospitals aren’t immune to FTC’s noncompete ban, lawyers, Fitch analysts warn
“Under the final rule, nonprofits would need to pass a case-by-case test of their organizations’ activities to be free of the Federal Trade Commission’s jurisdiction. More broadly, nonprofit hospitals—particularly small and rural facilities—are likely to face higher wages and potential operational disruption should the ban survive the courts…”
The Tie That Binds
By David Jarrard and David Shifrin
3-minute read
You’re now competing with the end of noncompetes.
While one might argue the terms employers weave into contracts to restrict employees from working for the competition are not-dead-yet, you can start writing the obituary now.
If legal handcuffs are the only thing keeping key colleagues tied to your healthcare system, know the tie that binds is breaking. You’ll need a different kind of connection to keep them.
The Federal Trade Commission ruled earlier this month to end most noncompetes. The US Chamber headlined a group that quickly sued to stop the ban, but blood is in the water. And of course, in this election year the lawsuit has political undertones based on “the choice of forums.”
Some states have already enacted bans (or, near bans) on noncompetes, and many healthcare providers have been reconsidering the need for them at all. In their place? Greater use of nondisclosure agreements and trade secret laws.
Yes, noncompetes typically only come into play for physicians, not the wider workforce, but physicians aren’t kept in isolation from the rest of the team – the way they interact with the organization as an employer won’t happen in a vacuum.
And yes, nonprofit hospitals may be narrowly and specifically exempt from the noncompete restriction, but that’s muddy water today and even so, nonprofits will feel the impact of the broader prohibition.
“The widespread ban on noncompete contracts…will throw a wrench into the staffing and finances of nonprofit hospitals, legal experts and Fitch Ratings analysts say,” reports FierceHealthcare.
“The FTC wrote in its rule that nonprofits outside its jurisdiction that continue deploying noncompetes ‘may be at a self-inflicted disadvantage in their ability to recruit workers, even if they derive some short-term benefit from trapping current workers in their employment.’”
Pro tip: One always wants to avoid a “self-inflicted disadvantage,” less kindly referred to as an “unforced error.”
Not everyone agrees with the FTC (shocker): Here’s a callout from the Wall Street Journal, authored by the CEO of Ryan LLC, a plaintiff in the suit against the agency: “The FTC claims the new rule will improve labor mobility and give ‘entrepreneurs and would-be entrepreneurs’ the opportunity to compete against larger companies. In reality, the rule will hurt workers. It threatens employees’ ability to launch and sustain careers because the ban makes it riskier for companies to invest in the development of employees, who can now easily move to competitors.”
No one wants their colleagues to feel trapped in their jobs, nor does anyone want to inhibit team members’ growth and development, especially those you have worked so hard to recruit and spent so much to retain in this long workforce drought.
Every healthcare professional in your organization – every clinician, every tech, every environmental services worker, every admin – is a precious hire for the delivery of care at your organization. Every colleague is an investment in the future.
Your organization must have more gravitational pull than a document of any kind from the legal department to keep your people – especially your best people – from reaching escape velocity.
You know what it is: your culture.
From Compliance to Community
More than ever, it’s important for healthcare leaders to reframe the connection to your colleagues from one of compliance to one of community. How?
Shift the mindset. Healthcare leaders concerned by the FTC’s decision would do well to adjust from a transactional mindset to one of shared mission. Does your team work together because everyone entered an agreement to provide X in exchange for Y? Or because there is a deeply held sense of shared purpose and passion? Note: The two are not mutually exclusively. Do well and do good.
Focus on commitment over compliance. An overemphasis on paperwork and contracts devalues the employee-employer relationship and, in turn, reduces the result. A transactional mindset places focus on what is required, and nothing more. In that environment, everyone is worse off – you get less from your team and they are lesser versions of themselves, producing something less than their best.
Increase flexibility. This isn’t a Pollyanna call for turning hospitals into contract-free communes. The structure of employment agreements matters greatly.
Demonstrating a strong, supportive culture through those technical necessities means being flexible to different arrangements. JVs, alignments, affiliations… the list goes on when it comes to physicians in particular. Different models will appeal to different groups. At the core of it is the reality that every healthcare organization is a complex, unique system that requires creativity and real-time adaptation. Employment models that both encourage and support that flexibility will help push everyone towards that ideal of shared commitment.
Recognize colleagues as individuals. Always invest energy into supporting employees of all types, all tenures and all ages. Invest more into understanding and engaging flight-risk employees. Example? Gen Z colleagues may offer you a different perspective on what they want from your organization, even as they hunger to work in a place of shared purpose.
Dust off the EVP. An employee value proposition that lives up to its promise will work wonders for recruitment and retention. In markets where compensation packages don’t differ enough to be the deciding factor in non-physician staff leaving for the hospital across town, a great culture where the EVP does what it says it will is the golden ticket to a strong workforce.
If the people in your organization are its lifeblood, the culture is the connective tissue. Strengthen it, exercise it, build it. Your people will be supported by it and, in turn, feed it. It’s a virtuous – if difficult – cycle that will keep people engaged, regardless of the papers they signed.
Contributors: James Cervantes, Kevin Kearns, Courtney Tedesco, Emme Nelson Baxter
Image Credit: Shannon Threadgill
