Kate Rigby and Dan Fahey, Members of the Firm in the Employment, Labor & Workforce Management practice, were quoted in Crain’s Chicago Business, in “Why the FTC’s Noncompete Rule Will Make Chicago Hospitals Look Over Their Shoulders,” by Jon Asplund. (Read the full version – subscription required.)

Following is an excerpt:

A federal rule banning most noncompete clauses may never be enforceable, but it may be a harbinger of how nonprofit health systems, like those that dominate the Chicago market, will face more scrutiny. …

Given that FTC enforcement is likely to face a court injunction - the U.S. Chamber of Commerce and a private employer, Ryan LLC, have already sued in federal court - health care organizations don’t need to panic, said Katherine G. Rigby, a Boston-based attorney specializing in employment compliance with the law firm Epstein Becker Green. …

“After an extensive discussion of the health care industry and, among others, nonprofit hospital systems, the commission warned, ‘not all entities claiming tax-exempt status as nonprofits fall outside the commission’s jurisdiction.’ The FTC noted that it ‘looks to the source of the income, i.e., to whether the corporation is organized for and actually engaged in business for only charitable purposes, and to the destination of the income, i.e., to whether either the corporation or its members derive a profit.’ Unless an organization passes this ‘two-prong test,’ the commission insists they are bound by the final rule regardless of their claimed tax exemption,” according to an analysis co-written by Rigby.

The increased scrutiny, at both the federal and state level, comes at a time when hospital markets have become ever more competitive, including in the Chicago market, said Daniel L. Fahey, a Chicago-based health care lawyer with Epstein Becker Green. …

“Hospitals and academic medical centers make an investment in their physicians that they want to protect,” he said. “Now with the FTC signaling that these groups might not enjoy their nonprofit status fully, it’s time for hospitals and systems to look under the hood."

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