Why the FTC's noncompete ban proposal could be 'detrimental' to DSOs

A recent proposal by the Federal Trade Commission could harm competition among DSOs and potentially lead to additional employee turnover, according to one DSO exec.

The FTC proposed a rule that would ban employers from imposing noncompete agreements on employees. In addition to prohibiting employers from entering or attempting to enter noncompete agreements with workers, the rule would also make it illegal for employers to maintain a noncompete or represent to a worker that they are subject to a noncompete agreement under certain circumstances. Employers would also be required to rescind existing noncompete agreements.

The rule would apply to independent contractors as well as anyone who works for an employer, whether paid or unpaid. The organization estimated that noncompete agreements affect 18 percent of U.S. workers and that a ban could increase wages by nearly $300 billion each year.

Barry Lyon, DDS, is chief dental officer of the division of orthodontics and pediatric dentistry at Sarasota, Fla.-based DSO Dental Care Alliance. He recently spoke with Becker's about the FTC's proposal and how it could affect DSOs.

Editor's note: Responses were lightly edited for clarity and length.

Question: What are your thoughts on the FTC's proposal? What kind of impact do you think this could have on dental employers and employees?

Dr. Barry Lyon: The FTC claims noncompete clauses foster unfair competition. At face value it may appear that is true. But prohibiting noncompetes opens a Pandora's Box of issues.

On one hand, the FTC's proposal could help alleviate the provider shortage that all DSOs are facing today. On the other hand, it could lead to additional turnover of DSO providers. 

The proposal would be detrimental to DSOs when a provider leaves and takes patients with them. Further, it would jeopardize the release of a DSO's trade secrets and company plans.

On a larger scale, whereas the ban could increase wages by nearly $300 billion each year, wage increases are inflationary, and that's the last thing this country, or any DSO, needs now.

Public comment will ultimately further cloud the waters.

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