[00:00:09] Speaker A: Welcome back to the stimulating stuff podcast. I'm your host rich Vogel, and today I'm jumping headfirst into non competes, non solicitations and training repayment agreements. Scott Moore ask and you shall receive. By the way, for those who don't know, Scott is a colleague who posted about non competes on LinkedIn and asked me to opine. Heres what he noncompetes have been part of intraoperative neuromonitoring agreements for as long as ive been in a field. These regulations have largely shaped how we recruit, hire, and incentivize neuromonitoring professionals. If this plan moves forward as stated, big if he says, I think it will radically impact our market. Looking forward to hearing thoughts from industry experts Joseph Hartman and Rich Vogel on this topic.
[00:00:57] Speaker B: Well Joe, I'm sure you'll have something to say about it too, but this will be my perspectives on it. So ask and you shall receive.
In case you're not aware, here's what's happening just last month in fulfilling the Biden administration's promise to ban non competes, the Federal Trade Commission, the FTC, published a 570 page ruling on non compete clauses. The rule prohibits companies from enforcing existing non compete agreements on anyone other than senior executives. The ruling was passed by a three to two vote along party lines. Democrats supported elimination of non competes and Republicans did not. The FTC's rule argues that non competes are an unfair method of competition and thus a violation of section five of the FTC act, which now renders it illegal for a person to enter into or attempt to enter into a non compete to enforce or attempt to enforce a non compete, or represent that the worker is subject to a non compete. The FTC argues that non compete clauses, which typically prevent workers from taking a new job or starting a new business for a certain period of time after leaving an employer. They argue that it hampers competition for labor and results in lower pay and benefits for workers. According to the FTC, one in five americans is subject to non compete agreements. Even lower wage workers, such as security guards and hairstylists who lack access to intellectual property or trade secrets, have occasionally been subject to them. Physicians are sometimes subject to non compete clauses, and some have been forced to move from one state to another to practice medicine at a new employer.
The Federal Trade Commission also argues that non compete restrictions hamper competition for labor because employees can't easily leave for higher pay and better benefits. According to the FTC, removing the non compete restrictions would result in the creation of 8500 new businesses each year and boost employee earnings across the board by more than $400 billion over ten years. Analysts report this translates to an average employee earnings increase of approximately dollar 500 per person per year. Beyond that, the Federal Trade Commission estimates that non compete ban will save nearly $200 billion in healthcare costs over the next decade. About 30 million Americans, or 18% of the workforce, are covered by non compete agreements, including an estimated 35% to 45% of physicians.
Almost immediately after the ruling was published, the US Chamber of Commerce challenged the regulation in federal court in East Texas. I may be wrong about this, but I believe the Eastern District of Texas is part of the Fifth Circuit. But either way, this particular federal court is widely known as the most friendly court in the to businesses and the ultra conservative sociopolitical agenda. It's called venue shopping. If you want to push a highly conservative agenda, you go through East Texas and or the Fifth Circuit. By the way, the United States Chamber of Commerce is a business association advocacy group. It is the largest lobbying group in the United States and it is funded primarily by multinational corporations. Their primary argument is that non competes are an effective way to protect a business's intellectual property, customer relations, relationships and other investments.
So while some companies are arguing their intellectual property, or IP, is at risk with this new ruling, it's really a moot point because there are separate laws that make it illegal to steal IP. The Uniform Trade Secrets act, which has been adopted by nearly every state in this country, allows businesses to sue other companies or individuals that they feel that proprietary information has been stolen. However, the laws apply only after information has been misappropriated and companies must have some evidence that confidential information was stolen or misused. So the IP argument honestly is horseshit. But the US chamber of Commerce will throw everything at the wall to see what sticks. Hospital groups have also spoken out strongly opposing the FTC ruling, arguing the ban makes it more difficult to recruit and.
[00:05:27] Speaker B: Reach and retain caregivers, while at the.
[00:05:30] Speaker A: Same time creating an anti competitive, unlevel playing field between tax paying and tax exempt hospitals.
[00:05:37] Speaker B: So, okay, so that's what happened. What's next?
[00:05:42] Speaker A: It's likely the court will issue a.
[00:05:45] Speaker B: Stay to stop this, at least temporarily.
[00:05:47] Speaker A: And this is. This is just me guessing.
[00:05:49] Speaker B: I really don't know.
[00:05:51] Speaker A: But remember, this was filed in East Texas because the court is friendly to conservative agenda. So I think it will be paused by the court. I don't honestly fully recall the specific judicial process. Like, does this go to the Supreme Court? But if it makes it to the US Supreme Court, I'm guessing it will.
[00:06:09] Speaker B: Be struck down by the conservative majority.
[00:06:11] Speaker A: Who would essentially be voting in favor of businesses and not workers, which seems very typical for today's elitist conservative court, who seem to have no problem taking money from businesses and wealthy donors, but not reporting this income, which is a clear conflict of interest. In any case, if it does get struck down by the Supreme Court, I guess it could get kicked back to the individual states to make their own laws, which is essentially where we are now. That being said, many businesses and financial analysts believe the opposite. Many people are saying that eventually this ban on non competes will stand.
What do I think about this?
Well, I love non competes. Just yesterday, some guys came to clean.
[00:06:56] Speaker B: A rug in my house and I.
[00:06:58] Speaker A: Made them sign a non compete so.
[00:07:00] Speaker B: I could be the only person in.
[00:07:01] Speaker A: Nashville with a clean rug. After all, I need to be competitive.
[00:07:04] Speaker B: If I sell my house.
[00:07:06] Speaker A: Just kidding.
So what do I really think? Well, people want to stay with their job because they love it, not because they have no other options. Companies, they want to enjoy the privilege of competing in a free market, but they want to restrict employees from doing so. That doesn't make for happy employees. When employees go on the job market, they are essentially putting themselves out to auction.
[00:07:32] Speaker B: What do I mean by that?
[00:07:34] Speaker A: Well, think of it as an auction for your knowledge and skills. Auctions are extremely common in business, and there are significant benefits in this context. The buyers are prospective employers, and they determine the purchase price, which is your salary. It promotes competitive bidding and creates competition amongst the buyers. The more people bidding on your labor, the higher you can charge. But non competes do nothing but reduce the number of bidders on your labor. They reduce competition for your labor and ultimately limit your earning potential. This all equates to a transfer of wealth from the workforce, who tend to be younger, to shareholders, who tend to be older. And there's a lot of information about.
[00:08:21] Speaker B: This whole transfer of wealth idea and how the younger people today are absolutely being pillaged by the older generations in.
[00:08:31] Speaker A: Ways that have never happened before. And I don't know if you follow.
[00:08:35] Speaker B: Scott Galloway at all, but he is a former Bear Stearns financial analyst and is well regarded in both financial and political circles for his perspectives on these things.
[00:08:51] Speaker A: But anyway, non compete bans are not new, and data show that they actually tend to benefit companies, shareholders, employees and society. And a lot of this stuff comes from the FTC's 570 page ruling, which I did not read the entire thing. I kind of skimmed it to get.
[00:09:12] Speaker B: What I needed out of it.
[00:09:13] Speaker A: But in 2008, Oregon banned non competes for hourly workers and it increased wages by 3%. In 2012, Hawaii banned them for tech workers and increased wages by 4%. And California banned all non competes for all workers in the 18 hundreds. They have the largest state economy in the United States. It's the fifth largest economy in the world, behind the US, China, Germany, and Japan, and it contributes $4 trillion in gross domestic product every year. And it's home to the largest companies in the world. In 1994, a Berkeley economist theorized that California's ban on non competes was one of the main reasons Silicon Valley existed at all. And in 2005, economists at the Federal Reserve put forth statistical evidence supporting that theory. Apple, Disney, Google, Intel Meta, Netflix, Oracle, and Tesla were all able to succeed without limiting the options of their employees.
Yet outside of California, corporate boardrooms love non competes. Historically, they were attached only to highly skilled, highly paid jobs, but now they're becoming ubiquitous across different industries at all levels. Fast food workers are being forced to sign non competes, as are hairstylists and security guards. Roughly a third of minimum wage jobs in America now require such non competes. If forcing non competes on America's lowest paid workers sounds like indentured servitude, trust your instincts. And by the way, that's a quote from Scott Galloway. So what does all this mean for people working in neurophysiological monitoring? Well, if the ruling stands, non competes will disappear and you'll be free to work wherever you want and for whomever you want, even for yourself. If the courts overturn the ruling, I think you'll see non competes attached to every neuromonitoring job in America, at least in the states where non competes are legal. Speaking of which, it should go without.
[00:11:22] Speaker B: Saying, but I'm not a lawyer and.
[00:11:23] Speaker A: I'm not offering any form of legal advice. So my first recommendation to you, if you have a non compete, or are considering a job that requires a non compete, is have an have an attorney review your contract.
Even if your non compete is deemed invalid, a company could make your life hell by suing you. In this same post that Scott Moore put on LinkedIn, a tear chef made.
[00:11:52] Speaker B: A comment below and he says, while.
[00:11:54] Speaker A: Non competes are hard to enforce and a costly endeavor, employers can enforce non solicitation and breach of confidentiality. Additionally, the employer could make a claim of tortuous interference. During my time as an employer, I did prevail on these grounds.
[00:12:10] Speaker B: So torturous interference is a common law.
[00:12:14] Speaker A: Allowing a claim for damages against a defendant who wrongfully interferes with the plaintiff's.
[00:12:22] Speaker B: Contractual or business relationships.
[00:12:26] Speaker A: I could see that standing for non solicitation. I don't know about a non compete.
[00:12:31] Speaker B: But anyway, he's had some success with it. So anyway, you know, a company can.
[00:12:35] Speaker A: Make your life hell by suing you.
[00:12:36] Speaker B: You know, some of these companies have a lot of retort attorneys who are on staff or on retainer, and, and.
[00:12:44] Speaker A: It'S, it's fairly cheap for them compared to you to lay to wage a lawsuit.
[00:12:50] Speaker B: So just keep that in mind and like I said, run your contract by a lawyer.
[00:12:55] Speaker A: Okay. What about non solicitation clauses? The Federal Trade Commission also appears to be going after non solicitation clauses. So these agreements generally prohibit workers from doing business with prospective or actual customers of the employer. They could also prohibit a previous employee from recruiting current employees to come and work for or with them, although I've never seen this actually stand up because.
[00:13:22] Speaker B: You actually have to prove it.
[00:13:23] Speaker A: Anyway, the final rule does not ban non solicitation clauses unless they meet the definition of a non compete clause. This means the non solicitation cannot effectively preclude someone from continuing to work in the same field or prevent a worker from doing business with their former employer's client, where the client solicits the worker directly.
I'm not sure what to think about.
[00:13:49] Speaker B: All this, honestly, but I'm generally, I'm.
[00:13:54] Speaker A: Generally a fan of a free market, and that market extends to individuals and their right to start a business and contract with people they know who would be good for their business, whether they are previous workmates or prospective customers. Look, you can avoid all of this, and I'm talking to the companies now.
[00:14:12] Speaker B: By paying your people more money.
[00:14:13] Speaker A: That way, they won't want to leave and solicitation won't matter. In any case, solicitation, as I said before, is extremely difficult to approve.
What about training repayment agreements, which are the the abbreviation for that is aptly named Trap T R a P training repayment agreements. Traps are agreements in which the worker agrees to pay the employer for purported training expenses if the worker leaves their.
[00:14:41] Speaker B: Job before a certain date.
[00:14:43] Speaker A: The Federal Trade Commission's investigation found that traps may impose penalties that that are disproportionate to the value of trainers that workers receive or require the worker to pay alleged training expenses for on the job training. Furthermore, it was argued by the FTC that traps may be even more harmful than non competes because while non competes prohibit or prevent workers from seeking or accepting other work or starting a business after they leave their job, traps can prevent workers from leaving their job for any reason. The FTC ruling does not ban traps, but it does cover terms and conditions of employment that meet the definition of non compete.
[00:15:25] Speaker B: So I may be wrong about this.
[00:15:27] Speaker A: But it seems traps will remain in effect, but they cannot be used as a method of creating a non compete situation.
Training repayment agreement provisions have been highly contested in healthcare. Last year, a report from NBC News found the practice has become increasingly common, with some hospital requiring nurses to pay back as much as $15,000 if they leave or are fired before their contract expires.
[00:15:53] Speaker B: Beckers reported that nurses argue the provisions.
[00:15:58] Speaker A: Restrain them from speaking up about unfair working conditions and coerce them into staying in facilities with unsafe staffing. Hospitals and health systems, on the other hand, have said embedded training repayments into contracts is a longstanding practice, noting that comprehensive training programs are a significant investment.
Stay or pay provisions are in the purview of the FTC's ban when they are so broad or erroneous that it prevents a worker from seeking or accepting another job or starting their own business. Some hospitals have moved to end the practice in recent years, including Nashville based.
[00:16:36] Speaker B: HCA Healthcare and UC Health in Aurora, Colorado. So what do I think about all this?
And I'm thinking right now, specifically in terms of intraoperative neuromonitoring.
[00:16:51] Speaker A: I am generally in favor of payback clauses as long as they are structured properly.
[00:16:57] Speaker B: So think about this.
[00:16:59] Speaker A: You have no experience in the field.
[00:17:01] Speaker B: And a company offers you a job.
[00:17:05] Speaker A: Which you accept, and you get on the job training. And there are two forms of on.
[00:17:10] Speaker B: The job training that you get, one.
[00:17:13] Speaker A: You can think of as standard.
[00:17:14] Speaker B: You know, they're going to teach you how to use their, their computing system, where they track maybe pto and expenses and things like that. They're going to teach you really how.
[00:17:27] Speaker A: To function within the company, but then they're going to educate you. And this is education that you would otherwise get in a university setting. They're going to teach you neuroanatomy and neurophysiology, and they're going to spend a significant amount of time and financial resources, and time is a financial resource as well. They're going to spend that time educating you, and you're going to spend weeks in a classroom and you're not actually making any money for the company during that time.
And in those weeks in the classroom, you're going to gain just enough knowledge, frankly, to be dangerous. And then what are you going to do?
[00:18:08] Speaker B: You're going to walk away and take.
[00:18:09] Speaker A: All of that knowledge that you've gained from that company to a competitor who may or may not even have an education program.
So you just pillaged the company, the company that gave you a shot in this field.
You know, I think you should stick with the company for a while. You know, life circumstances happen.
[00:18:30] Speaker B: You know, there are tragedies and things.
[00:18:32] Speaker A: And you have a federal right to take a leave of absence. And there are state rights, too, during certain tragedies.
[00:18:39] Speaker B: But you don't have to leave the company.
[00:18:41] Speaker A: Sometimes you have to move. Maybe your spouse got a different job and it puts you in a different location. And for that reason, the company that you work for, though, they're no longer able to employ you because there's no jobs in that market, well, then they should release you from that requirement.
But if you want the freedom to walk under general circumstances, you should pay something for the knowledge and skills that you, you were given until you put in time. But it should be consistent with what the market will bear.
So those are just my opinions on the topic.
[00:19:17] Speaker B: I hope that was helpful to everybody. Be interested to hear what Scott thinks about that. Scott, shoot me an email.
[00:19:23] Speaker A: That's it for today. Thank you so much for listening. Please continue sharing this podcast on socials and through word of mouth. Please continue sending your comments, insights, and thought provoking questions to
[email protected] I always love hearing from you. I'm rich Vogel, and that was stimulating stuff.
