Bill Klaproth (host): This is AAOMS On the Go. I'm Bill Klaproth, and with me is Arindam Kar, an Attorney with Polsenelli PC, which represents the interests of oral and maxillofacial surgeons and their patients in Washington, D.C. Arindam is here to talk about recent policy and legal changes to non-compete agreements and antitrust laws as they relate to the healthcare sector. Arindam, thank you so much for your time today.

Arindam Kar, JD: Thanks Bill. Pleasure to be here.

Host: Yeah. I appreciate this. So let's jump right in with this. Can you please explain non-compete agreements and how they work, particularly in the healthcare sector?

Arindam Kar, JD: Absolutely. So non-compete agreements are, at its core, the idea of bringing in a person to your organization and whether it is training that person with any particular skills, or giving that person access to maybe a client list or something very proprietary as it relates to your client list. Or just perhaps the special sauce of your organization. Maybe it's a particular practice, maybe it's intellectual property. It could be a whole host of types of things that are very unique to your organization.

Once you bring in that person and bring that person into the fold, he or she or they are having access to all this information. And so, from an organizational standpoint, given that investment, given that trust that you've put in there, one of the concerns – that again, is very typical of any organization – is what if that person leaves? And not only that, what if that person leaves and goes to somewhere else, to another company or organization that is a competitor of mine?

Now that person has all this information about my clients, maybe has some information about what we call in the legal industry trade secrets, or what I also like to call, you know, sort of the special sauce of an organization. Or maybe they, you know, we spent a lot of money and effort to train this person and now they're taking their talents and they're going to be utilized at another organization that's potentially going to have access to all of this stuff or this training without really any investment.

Or perhaps this person decides, wow, this was great, but I'd really just like to set up my own shop now and do something very similar to what this organization is doing, but I think I can do it better.

In those scenarios, what an organization, historically in the U.S. what they've done, is develop what's called non-compete agreements, which is a either a provision to a larger employment agreement or maybe a standalone agreement that says, hey, we've invested all this time in you, all this training, or that you're getting access to all this confidential and proprietary stuff, and that's great. We're happy that you're here, but if you decide to leave, well then there's going to be some restrictions imposed upon you on how or when you might be able to utilize some of those talents or that information that you've been able to gain as a member of our organization.

And so these non-competes provide restrictions. It could be geographic that, hey, you can't take this and then start working down the street. It could be duration, hey, this is great, but you can't really work in this field again for maybe 18 months, something like that. That's what a non-compete agreement is at its core.

Why that becomes particularly relevant is maybe there are certain policies or practices that have been really good with respect to patient retention or referrals, policies. Again, kind of noting back to one of the points I just made, maybe there wasn't a lot of investment, whether it’s time or trainings or workshops that you sent a person to. So that person could be really valuable in a practice, whether that's a physician's office, or maybe at a hospital, wherever it may be. Those are some of those elements in the healthcare industry that particularly kind of come to the forefront when we're talking about these types of non-compete agreements.

Host: So that all is very interesting. Thank you so much for explaining that to us in depth like that. So then how do non-compete agreements relate to antitrust laws? When does that factor in?

Arindam Kar, JD: Yeah, great question, Bill. So the antitrust laws are an overarching series of laws that do have some implications to non-compete because again, and as the name suggests, right, we're talking about competition, right? In the labor market and imposing what we call vertical restraints, right? It's an employer that's restricting the free flow of labor of an employee that maybe was at that organization for some time and now has decided to go somewhere else.

And if that person decides to go to a competitor of that former employer, then these, this agreement can kick in. Right? And it's restricting that person's ability to, hey, can I work at this competitor? If I could work at this competitor, what can I or can I not do?

And so when we are talking about elements of restricting the flow of labor along with this idea of competition, what is vibrant competition and what is fair or unfair as it relates to restrictions on competition. That's when the antitrust laws come into play here. And so there's always an analytical approach to this. There's sort of standard labor employment law that applies to non-competes, and those things do impact the actual format of the agreement, if you will. But then there's this other layer of laws, the antitrust law, that kind of looks at this more of a, at a holistic approach of are these types of agreements fair or unfair, as it relates to the competition for labor and the free flow of labor in our economy.

Host: So then, have there been any recent developments regarding non-compete agreements that are particularly relevant to oral and maxillofacial surgeons that you can share with us?

Arindam Kar, JD: Yes, absolutely. So last year in 2024, we had – and this actually started in 2023 on the federal side – we had the Federal Trade Commission, which is one of the two federal agencies that oversees the antitrust laws for the U.S. government from a national perspective. They came out with a rule – a proposed rule – that said, hey, because of this, the importance of the free flow of labor and allowing people to find the job where it meets their sort of highest and best needs, even if it's leaving one company and going to a competitor. We think that the flow of labor is so important and that any sort of restrictions on that labor, impacts competition, could impact wages, a whole host of things. We think that this issue is so important, the FTC issued or proposed issuing a national ban on non-compete agreements. Meaning, hey, if this rule comes into effect, and there were sort of, there were some requirements of sort of how this would roll out, but the end effect was from a national perspective, non-competes, as related to employees and even to some other sort of statuses of people that work at organizations, these sort of non-compete agreements, except for a few exceptions, would be prohibited.

So that was probably the biggest, sort of newsmaker, if you will, as it relates to non-competes and Federal antitrust Law and Act absolutely would affect all aspects of professions, including in the medical field.

That was certainly anticipated, led to a lot of discussion, a lot of controversy, a lot of organizations lining up to either be in favor of this, or be opposed to it. So that was probably the biggest headline that we had recently.

Now, ultimately that ban never went into effect. There was litigation that prevented that rule to go into effect. There was also a case that came up in the Supreme Court that really put into question a longstanding doctrine called the Chevron Deference, which gave agencies certain rule-making authorities. And so that came in from the Supreme Court. That also put into question whether the FTC could do this or not.

So that was, those were two or a couple things related to the federal antitrust laws that were very noteworthy.

And then what we've been also seeing in terms of non-competes, and again also impacts this profession, is that we're seeing a lot of states, so not the federal law, but states deciding on their own, hey, we're going to take a position that non-competes are not appropriate and that we're going to ban them. Sometimes there are monetary thresholds. If you make a certain amount of money, then a non-compete can or cannot be used. And then we're also seeing some restrictions by profession. So we're seeing some states saying, hey, non-compete should not be allowed in the healthcare field, period.

So those are the biggest developments we've seen in the last few years.

Host: That's really interesting. I'd like to talk a little bit more about Chevron. So how does the recent ruling on Chevron impact the regulatory environment on the issue at this point?

Arindam Kar, JD: Yeah, great question. And hopefully none of your listeners will fall asleep on this part, but very quickly. We had a Supreme Court decision, the Loper decision, that – Loper-Bright decision – that came out and said this decades of deference to agencies to say, listen, if there's some ambiguity or some rules that need to be made or interpretations of regulations, a federal agency can make those and they may issue certain rules based on their expertise and interpretation of these regulations.

And if they do cause an issue such that someone has sued to challenge those regulations or questions, whether those are the right interpretations, the courts, again based on the precedence, the Chevron Deference, gave the federal agencies  – preferential treatment's not the right word, but again, deference is probably the best term. They gave them the benefit of the doubt, saying you're a federal agency. This is your job to look at these things. You employ experts in this industry or in this field. And so, if you're telling us that the interpretation of this regulation is so-and-so, then we're going to give you the benefit of the doubt. And you, the challenger, you have to hit sort of a higher burden to overcome that deference.

Well, the Loper-Bright decision, and there's a another companion case that had a similar holding, they both said, no, no, no. We really don't think this deference should be allowed to the federal agencies and folks should be allowed to question whether a certain regulation or interpretation is proper, especially if Congress has not specifically said anything about this particular topic.

What does this mean here and for non-competes? So this FTC ban that was proposed in 2023, 2024, that was really based upon this concept of deference for the FTC to interpret the FTC Act, which was the law that brought them into existence, and to really interpret what is meant by unfair methods of competition or unfair competition. It, that's really what's in the statute, and they're taking that and saying, we think non-competes are unfair, and they lead to unfair competition. Ergo, we're going to issue this ban, this rule banning non-competes because it's under our authority to interpret what the statute is.

Now this whole idea of whether the FTC could even do something like this moving forward has been called into question.

Host: Okay. So then moving forward, do you foresee any changes to non-compete agreements being taken at the federal level or with the current administration since the, seems like the playing field might be changing?

Arindam Kar, JD: I do think there will be some changes. I think the approach will be somewhat different. I think what folks will have to keep in mind is that this idea of applying the antitrust laws to labor and the movement of labor is not something that just recently popped up. It actually has been around for a while, and really the first administration for President Trump, they're the ones that actually escalated this to a more prominent issue.

They took the position, although not directly related to non-competes. They came up with a new rule to say if there are improper agreements amongst organizations to suppress wages, these are called wage fixing agreements, or if an organization talks to a to another competitor and says, hey, because of the high demand for a certain skill or a certain employee and, given the job market right now, I promise I won't poach any of your employees, if you promise you won't take away mine, and then we'll just continue to go out there, hire who we can, and we don't have to worry about you stealing my employees or vice versa. It sounds great in a microcosm, but the reality is this has always been in violation of the antitrust laws, but they were subject to civil penalties.

But the Trump administration said, oh, no, no, we think this is so bad, we are now going to criminally prosecute folks that go, that do this and organizations that do this. And the prime industry that's been targeted for these types of no-poach violations and wage-fixing violations have been in the healthcare industry.

And so fast forward now to the second Trump administration. What we anticipate and what we're seeing is that a continued interest in making sure that labor is protected from employers and organizations. I don't anticipate that we will see another national ban given what we just said about the Chevron Deference case kind of going by the wayside in terms of agency deference. But what we have heard from the commissioner of the FTC as well – one of the commissioners of the FTC, as well as the chair of the FTC  – is that non-compete agreements can be problematic, and we still believe that they can lead to unfair competition. They can hurt labor. They can raise wages.

And so what this administration has done is that they're going to continue to criminally prosecute bad, illegal agreements; those no-poaching and wage-fixing agreements. They're also going to, on a case-by-case basis, go after organizations that unnecessarily impose and utilize non-competes to restrict employees and their ability to leave and find new jobs in the industry after they've left that original organization. And they've stepped up on that and in fact have enacted and developed what's called the Labor Task Force. And they're out there looking for these types of cases and they will prosecute cases where they feel that non-competes are being unfairly used to restrict the flow of labor.

So, I do see continued enforcement. It'll be a little different than what the Biden administration did, where they tried to go for the home run and this national ban. But I do see this still being an important issue that employers and your listeners definitely need to think about from a practice perspective.

Host: Okay, let's talk about the practice perspective then. Bottom-line this for us. What should an OMS listening to this podcast need to know when it comes to potentially worried about someone quitting and going to the competition, or even hiring someone that might have a non-compete or they may not know about it? Bottom-line this for us. What's most important for OMSs to know?

Arindam Kar, JD: Yeah, bottom line, I would have two takeaways.

One, take account of what your practice's sort of history has been. Have you been employing a lot of non-competes? If so, it probably behooves you to consult, counsel and say, hey, can you do a quick audit and help us understand sort of what our risk profile is? This is how we've employed them. This is when we, and this is sort of our standard agreement. We may have so many of these out there right now. What's my risk factor?

Given, as I mentioned earlier, states almost daily are enacting laws that are further restricting the use of non-competes. There are sort of the classic ones that have been out there for a while. For example, California, has a, has a complete ban on non-competes. We're seeing some other states pick up on that. Minnesota. Oregon just passed a law two weeks ago that impacts non-competes in the healthcare field. So understanding sort of the lay of the land and what your risk profile is, is probably number one to appreciate that.

And then number two, given the trends that we're seeing, again, I don't anticipate a national ban, but clearly there's federal scrutiny of these types of agreements. And then as I mentioned, there's sort of this ongoing trend of states restricting the, an employer's use of non-competes. What does this mean? Again, it means you're just going to have to find a different way to protect those proprietary interests of the organization.

If you are investing a lot of time in training and workshops and just sort of bringing someone onboard, there are different ways outside of a non-compete where you can protect your investment in that.

If there are certain trade practices or secrets that your practice uses, that really is part of that secret sauce to your organization's success, there are trade secret restrictions and NDAs that could be utilized, that could maybe get you the same protections, but without sort of this blunt instrument, if I may, of a non-compete that just says you can't go work anywhere for another surgeon anytime soon.

This is the way that I think would be helpful for your listeners to think about this and understand the risk, and then maybe employ some alternative methods to still meet those goals that you want, but without the risk of a non-compete.

Host: From your personal opinion, you work in this, you know, you know this backwards and forwards. I'm just curious, your personal opinion on non-competes, do you think they're good? Are they worthwhile? You said there are several states that have banned them or considered it. What's your personal thought on these non-competes?

Arindam Kar, JD: Yeah, great question. I would say the underlying values that an organization is trying to protect, right? Client lists, investment costs in new employees, trade secrets. These are all absolutely valuable things that an organization ought to protect.

The non-compete, I believe historically, was an easier way to sort of protect all those things in one simple document. And I want to be clear, there are still perhaps in certain situations where a non-compete is the best thing to utilize, subject to state law and other things that may be out there. So they do have their purposes.

I think where we are now, and this is sort of where I side on, is that we just have to be more nuanced, more refined in our approach to protect those values, those assets, those ideas that an organization has. And it can still be done. You just have to be a little more, I don't think creative is the right word, but just more precise in the way of doing it. And there are ways to do that, and you still meet your end goal without the risk of the non-compete.

So in a way I get where it originated from, kind of back to your first question, what was the purpose of these types of agreements? But where we are now and given the importance, from a national public policy standpoint of the free flow of labor, I think this is the balance that we're approaching and I understand it and I'm certainly trying to help our clients navigate this shift in terms of public policy and the law.

Host: Yeah. Well, this has been really helpful and insightful. I want to thank you for your time. Before we go, is there anything I didn't ask you or anything else you want to share that we should know about these non-competes?

Arindam Kar, JD: No, I think we did a pretty good high-level cover of sort of where it started, why it's important, what are the challenges and where to go. So, obviously happy to talk about it more if there's additional questions on this.

Host: Awesome. Arindam, thank you so much for your time. This has really been good. I really appreciate it. Thank you.

Arindam Kar, JD: Thank you, Bill.

Host: Once again, that's Arindam Kar.

To learn more and to get involved in AAOMS's advocacy efforts, please visit AAOMS.org/Advocacy.

And if you enjoyed this podcast, please share it on your social media and make sure you subscribe so you don't miss an episode. I'm Bill Klaproth. This is AAOMS On the Go. Thanks for listening.