The Past and Current Administrations' Impact on Physician Non-Competes
Updated: Jun 21
Given the recent trend of states’ imposition of limitations on non-compete clauses in physician contracts, questions have arisen whether such trend was a result of an Obama Administration program which would see its conclusion with the new Trump Administration. It appears that former President Obama did take a number of steps designed to eliminate barriers to competition, such as non-compete provisions in employment contracts. Specifically, in April 2016, President Obama signed an executive order requiring governmental agencies to propose actions to increase competition. Further, in October 2016, President Obama published a State Call to Action on Non-Compete Agreements which urged states to limit the enforcement of non-competes against employees. However, both of these actions came at the heel of an already increasing trend among the states to limit non-compete provisions in employee contracts. Accordingly, although it is clear that President Obama intended to encourage this regulatory state trend, he did not initiate the trend himself.
The question remains, however, whether the Trump Administration will take action to thwart state limitations on non-compete provisions. Although President Trump did not focus on such employment issues in his campaign or initial agenda, President Trump is known for his status as a businessman and has himself used strict non-competes in his own business contracts. Further, given the pro-business makeup of President Trump’s cabinet, it is unlikely that the Trump Administration shares former President Obama’s views on non-compete provisions. That said, given President Trump’s push toward anti-regulation and the promise to repeal two regulations for every one that is passed, it is also unlikely that he will be encouraging governmental agencies to impose any regulation hindering states from limiting the use of non-compete provisions. Rather, the Trump Administration will likely take a “hands off” approach to this issue and leave the matter up to the states, thereby suggesting that the trend toward non-compete limitations may continue along its previous path.
Regardless of the current administration, state employment laws are constantly changing, whether such changes are related to non-compete provisions, wage and hour requirements, or otherwise. As state laws change, employment contracts with future employees must change as well. Accordingly, employers must be careful about using the same employment contract for former, current and future employees. Whereas certain provisions in a contract may have been permissible ten (10), five (5) or even one (1) year ago, they may now be prohibited by law. Including such unlawful provisions in employment contracts may result in the entire contract being deemed invalid. To avoid this possibility, it is critical that any new employment agreement be reviewed by an attorney with knowledge of these changing laws.