Could FTC’s Noncompete Ban Inject Life into the Nursing Field?

• In April, the Federal Trade Commission announced it would establish a noncompete ban across U.S. industries.
• As a result, nurses will no longer be hindered by noncompete clauses, or NCCs, if they choose to leave an employer.
• The ruling has resulted in a mixed response in the medical community.

Noncompete clauses will no longer hinder nurses who want to remain in their profession — or the city they live in — when looking for a new job.

In April, the Federal Trade Commission (FTC) announced it would ban all noncompete clauses nationwide, with FTC Chair Lina M. Khan stating that the ruling will allow Americans to seek new employment, establish a new business, or “bring a new idea to market.”

“Noncompete clauses keep wages low, suppress new ideas, and rob the American economy of dynamism, including from the more than 8,500 new startups that would be created a year once noncompetes are banned,” Khan said. 

The ruling will take effect on Sept. 4, 2024. But efforts to eliminate NCCs (noncompete clauses) at the state level began long before the FTC’s efforts. Here’s how nurses have been affected so far, and how the national ban could alter the healthcare landscape. 

What Does the Noncompete Ban Ruling Mean?

The FTC first introduced the proposed rule in January 2023, with advocacy groups for nurses and hospitals making their voices heard. 

Debbie Hatmaker, chief nursing officer and executive vice president of the American Nurses Association, said in a memo prior to the final FTC ruling that NCCs “undermine competition” and close markets to some workers, including nurses. 

“This harms the employees as they are unable to work in their field without paying expensive penalties to their original employer,” Hatmaker wrote. “It may also harm employers as it severely limits the pool of possible employees.”

National Nurses United also supported the ruling, calling it a “step in the right direction.” 

“We know that TRAPs and other stay-or-pay contracts exploit vulnerable new graduate nurses at the very start of their careers,” NNU President Nancy Hagans, RN, said in a news release. “We see the chilling effects these contracts have on a nurses’ ability to advocate on behalf of their patients when they face harassment, termination, and potentially ruinous financial consequences for speaking out about unsafe conditions that affect patient care.”

However, the American Hospital Association called the ruling “bad law” and “bad policy.”

“The agency’s stubborn insistence on issuing this sweeping rule — despite mountains of contrary legal precedent and evidence about its adverse impacts on the healthcare markets — is further proof that the agency has little regard for its place in our constitutional order,” said Chad Golder, AHA’s general counsel and secretary, said in a statement. “Three unelected officials should not be permitted to regulate the entire United States economy and stretch their authority far beyond what Congress granted it — including by claiming the power to regulate certain tax-exempt, non-profit organizations.”

In its comment letter to the FTC, the AHA argued that the ruling would “profoundly transform” the healthcare labor market and that the FTC doesn’t have the authority to issue the ruling.

“It would instantly invalidate millions of dollars of existing contracts, while exacerbating problems of healthcare labor scarcity, especially for medically underserved areas like rural communities,” wrote Melinda Reid Hatton, general counsel and secretary, in February 2023. “Perhaps most troubling, the FTC would take this monumental step on the apparent basis of economic research that does not actually support the proposed rule.”

Because of the ruling, workers across the board could see earnings increase by $524 annually alongside lower healthcare costs, the FTC said. 

Nurses and the Noncompete Clause

Noncompete clauses can limit both the distance a former staffer can work from the current employer and establish a timeframe for how long a worker must wait to be employed in the same field, should they choose to leave their employer.

“One nurse told ANA that her non-compete agreement banned practicing in her field, emergency medicine, for five years after leaving her employer,” Hatmaker said. “The only recourse is extensive retraining if providers choose to leave their place of employment. The unnecessary training keeps providers out of the employment marketplace for the time that it takes to learn a new specialty, even if they want to remain focused on their existing specialty.”

But some nurses aren’t even aware they have a noncompete element in their contracts. A study published in 2015 in the “AANA Journal” looked at that awareness among nurse anesthetists and found that a majority of student registered nurse anesthetists and certified registered nurse anesthetists were unaware of the clause.

Of the 242 CRNAs who participated in the study, more than 60% didn’t have a noncompete and roughly 9% didn’t know if they had a noncompete in their contracts. The study authors also found a “significant difference in knowledge level” between CRNAs who practice independently and those who in a group practice.

“Independent CRNAs had more experience with declining positions, changing positions, and loss of employment due to NCCs,” the study stated. “More CRNAs believed the NCC is not applicable to practice, and no evidence existed to show a relationship between geographic location and having an NCC.”

In 2020, Jennifer Brown, a Wyoming nurse, was sued by her former employer to enforce an NCC and ordered to cease providing home health care. As a result, she had commuted more than two hours and took a $15 per hour pay cut to continue working in the field, according to a 2020 Full Stack Economics report. 

“Not only did they take away my means to support myself — they took away my means to feed my granddaughter,” Brown told Full Stack Economics. “As a nurse, I should never have that problem.” 

So… Now What?

Prior to the FTC ruling, several states had already implemented, or started to implement, bans on noncompete clauses, some specific to the healthcare field.

Triage Health Law noted in an April 2024 blog that over the past several months, seven states had taken steps toward restricting NCCs. Of those, three specifically mentioned nurses: 

1. A Connecticut statute imposes additional limits on NCCs with APRNs and other healthcare workers. 
2. An Illinois law “generally bars” staffing agencies from entering NCCs with nurses and CNAs.  
3. Iowa created additional protections in the mental health field and for nurses “who engage with outside staffing agencies.”

But other states, like New York, outright vetoed a bill that would have banned NCCs in the state. Gov. Kathy Hochul said in response to her veto that the bill was “too broad as written,” according to Nurse Journal.

Even with the ban, employers have “several alternatives” to NCCs that provide similar protections, according to the FTC, such as trade secret laws and non-disclosure agreements. 

However, existing NCCs for senior executives (defined as those in policy positions who earn upwards of $151,000) can remain in place, the FTC said, with the caveat that no new NCCs can be issued or enforced for senior executives. 

The Bottom Line

In April, the Federal Trade Commission announced its final ruling on a ban on noncompete clauses in all industries in the United States. Nurses are among those affected, with many being unaware they even had a noncompete clause in their contract. Though organizations that advocate for nurses supported the ban, others like the American Hospital Association believed it was an overreach and that the FTC doesn’t have the authority to issue a blanket ruling. Barring any legal complications, the ban is expected to take effect in September. 

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