Nurses and the Non-Compete: Why a Proposal to Ban Non-Compete Agreements in New York Has Nurses Thinking Big
- In June, the New York State Legislature passed a bill banning most non-compete agreements.
- New York Governor Kathy Hochul recently vetoed the bill but is expected to revisit it later this year.
- Non-competes restrict employees, including nurses, from working for competitors after they leave an employer.
In June, the New York State legislature passed a bill banning most non-compete agreements. The bill promised to ban non-competes — a common practice for nurses nationwide — and give employees more freedom when selecting their next employer.
Throwing a curveball, New York Governor Kathy Hochul vetoed the legislation in December after initially signaling support for the bill, calling the bill too broad as written. However, there is still hope for the bill's proponents. The Democratic governor indicated she is willing to revisit a new version that maintains non-competes for employers and "highly compensated talent" while banning the practice for workers earning below $250,000.
"I continue to recognize the urgent need to restrict non-compete agreements for middle-class and low-wage workers, and am open to future legislation that achieves the right balance," Hochul wrote in a memo.
If New York did pass a bill banning non-compete agreements, the state would become part of a growing national trend. The Federal Trade Commission (FTC) is considering a national ban under the Biden administration. It will allow employees, including nurses and nurse practitioners, to move freely from positions and strengthen their skills without fear of being penalized for leaving. Five states — California, North Dakota, Oklahoma, Minnesota, and Colorado — have fully banned non-compete agreements.
A complete ban on non-compete agreements in New York has big potential implications for nurses and nurse practitioners. A complete ban would allow nurses to work freely without being restricted from working for a competitor or paying a penalty if they want to switch roles.
“[Non-competes] harm the employee as they are unable to work in their field without paying expensive penalties to their original employer,” said the American Nursing Association (ANA) in a statement to FTC Chair Lina Khan. "Non-compete agreements undermine competition and close parts of the market to some classes of workers, including nurses in many cases.”
What Is a Non-Compete Agreement?
The U.S. Department of the Treasury defines non-compete agreements as "contracts between workers and firms that delay employees’ ability to work for competing firms. Employers use these agreements for a variety of reasons: to protect trade secrets, reduce labor turnover, impose costs on competing firms, and improve employer leverage in future negotiations with workers.”
According to a survey by the Journal of Law and Economics, approximately 18% of labor force employees are constrained by non-competes, with 38% agreeing to at least one non-compete agreement in the past.
Nurses and nurse practitioners may be asked to sign a non-compete agreement before starting a new position or switching jobs. A nurse may be eager and excited to take the position, especially if the salary is competitive and the job offers an ideal work/life balance. But, non-competes can be particularly harmful to nurses and nurse practitioners. Non-competes are designed to protect the employer.
Once signed, the agreement restricts employees' choices on where and who they work for and prevents them from doing business with former clients and/or customers. Non-competes may even dictate when they are allowed to leave the company.
Employers justify signing a non-compete agreement because it protects the business's investments and trade secrets. They fear that employees will only leave and share important competitive edge data if they have the agreement. The ANA points out that trade secrets are not an issue in healthcare delivery.
“It would seem that the only reason healthcare employers require nurses to sign non-compete agreements is to enhance retention and to control where any future employment occurs,” the ANA said in its statement to Khan.
Why Are Nurses Skeptical of Non-Compete Agreements?
Nurses and nursing organizations like the ANA are skeptical of non-compete agreements because of their clauses. Often, the clauses can be egregious. For example, if the nurse leaves the company, it will be impossible for the nurse to work anywhere in the U.S. for a specific number of years.
The ANA statement denouncing non-compete agreements highlights a story of a nurse who signed a non-compete with a clause restricting the nurse from doing similar work within 7,500 miles.
“That encompasses the distance from New York City to Hawaii and still has over 2,000 miles left over. The result of this, if enforceable, is that this nurse would not be able to work anywhere in the fifty states if they chose to leave their current position, creating a modern version of indentured servitude,” the ANA said.
Non-compete clauses are anti-competitive. A nurse or a nurse practitioner wouldn’t want to sign a non-compete agreement because it makes it impossible for the nurse to realistically work anywhere, nationally and even internationally. The clauses impede the free flow of labor. However, in many states, it's still enforced.
What Happened to the Non-Compete Proposal in New York?
Hochul vetoed a total ban on non-compete agreements, signaling that the bill had problems that needed to be addressed before signing it.
The bill updated labor laws regarding using non-compete agreements and denounced them because they violated employee rights. However, the bill had problems Hochul believed couldn’t be ignored. Many lawmakers weighed in with objections to the bill, noting that:
- A total ban was too broad. It included lower-wage and higher-waged workers and did not include a minimum salary. In other states that have banned non-competes, a salary minimum was included.
- The ban hurt the company’s ability to keep top talent in its facilities, especially since New York is one of the top financial capitals globally.
- It needed to be clearly defined how to distribute bonuses and stocks.
- No clauses in the non-compete agreement addressed the sale of a business.
- Certain definitions, like who is a “covered individual,” were not clear.
- The bill needed to make it clear as to when and how non-competes could be used.
New York State Senator Sean Ryan, the bill’s sponsor, thinks Hochul missed the opportunity to have New York join the states that banned non-competes.
“There is a growing movement to ban non-competes, and New York has missed out on a major opportunity to boost job growth, wages and economic security for millions of workers," Ryan said in a statement.
What Does the Future Hold for Nurses and Non-Competes?
The future for nurses and non-competes looks promising. Under California law, nurses do not have to sign non-competes — they are deemed unlawful and cannot be included in an employee's contract.
Colorado law deems non-competes as “unlawful to use force, threats, or other means of intimidation to prevent any person from engaging in any lawful occupation at any place the person sees fit.”
Banning non-competes also improves patient care. Allowing nurses and nurse practitioners to work freely allows them to continue to care for and treat their current patients.
According to nursing advocates, another positive of banning non-competes is that it will help with the national nursing shortage, which continues to be a major concern. Enforcing non-competes only further complicates matters.
“The agreements generally do not allow providers to practice health care within their field for a certain amount of time,” the ANA noted in its statement.
While the ANA opposes nurses signing non-compete agreements, the organization favors non-disclosure agreements (NDAs). The ANA says that employers can and should enforce NDAs and use them to protect the company’s confidential information.
Signing non-compete agreements is still very common for nurses, and without a national ban, nurses and nurse practitioners will be obligated to sign them. However, nurses should feel empowered to negotiate their contracts. They should also consult a lawyer to navigate them or draft better agreements.
Nurses and nurse practitioners should also stand together and advocate against restrictive non-competes. They can simply not sign them or know how to get out of a non-compete agreement. They should also know the laws in the states they practice in. Certain non-compete agreements may go too far and be invalid under a court of law. Lastly, nurses should seek educational classes related to regulations about nursing practices in their state.
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