White House Council of Economic Advisors Cites Non-Competes as Factor in Increasing Labor Monopsony

I vaguely recall the word “monopsony” from an introductory economics course, but to be honest, I could not remember what it means. The term monopsony is defined as, “a market condition where one or a small group of firms exercise such control over a particular product or service that they are able to pay lower prices for its inputs.” While a monopoly can result in higher consumer prices, a monopsony allows the controlling company to lower its costs of production by paying less than would be the case in a competitive marketplace.

Earlier this month, the President’s Council of Economic Advisors released an issues brief discussing the consequences of a labor market monopsony on wages and economic equality. The Council identified monopsony as a significant contributing factor behind slow wage growth in the U.S. in recent years. Absent a competitive labor market in some industries, employees lack the ability to increase their incomes by selling their services to a competitor.

In addition to market concentration, the issues bulletin notes recent cases of wage collusion among competitors in Silicon Valley and in the healthcare industry who allegedly agreed not to hire each other’s employees. The bulletin also cites non-competition agreements as a significant contributing factor toward market monopsony, noting that 18 percent, or 30 million U.S. employees are currently restricted from moving to competitors. Finally, the Council points out that the decline of organized labor, regulatory (i.e., licensing) restrictions and lack of healthcare portability also contribute to a lack of labor mobility.

The issues bulletin concludes by setting forth a list of proposed remedial steps such as increased antitrust enforcement efforts. More importantly for employers, in addition to the bulletin, the White House also released a set of “best practices and call-to-action” for states to implement specific policy reforms to “curb the use of unnecessary non-compete agreements.” Among other recommendations, the White House urges states to ban non-compete agreements for (1) workers under a certain salary threshold; (2) those who do not have access to trade secrets; (3) workers in public interest vocations; and (4) employees who have been terminated or laid off without cause.

Neither the issues bulletin or White House best practices guidelines have any force of law. However, they represent one of the first expressions of federal interest in controlling state law governed non-competes. In recent years, state courts and legislatures have become increasingly hostile to non-compete agreements they view as overbroad or unfair. If Democrats continue to hold the White House or regain control of Congress, these new policy documents could represent an indication of future federal legislative and regulatory intentions.

Jonathan Crotty

Jonathan Crotty

Jonathan Crotty has been a successful counselor and problem solver for large and small employers in the Carolinas and beyond for over 20 years. He heads Parker Poe’s Employment and Benefits practice group and represents employers in all aspects of the employment relationship, from hiring to discharge. Mr. Crotty provides guidance to employers as they navigate the complex array of laws and regulations applicable to the employment relationship, including employment discrimination laws, OSHA compliance, FMLA, and wage and hour matters. If employers face legal or administrative claims resulting from their employees and employment practices, he defends and resolves those disputes in line with the client’s goals and expectations.

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First, Do No Harm: Analyzing the Certificate of Need Debate in North Carolina

From time to time the Parker Poe Health Care Blog will be asking experts in the health care field to serve as guest bloggers. Our first guest blogger is Daniel Carter from Ascendient. Ascendient is a Health Care Consulting firm located in Chapel Hill, North Carolina, that provides strategic health care planning and Certificate of Need advice and analysis. Ascendient has recently completed an in-depth analysis of the Certificate of Need (“CON”) law in North Carolina to determine how a potential repeal of the law would affect health care providers and consumers in the state. After reading it, we decided we should share this analysis with you. Here is a summary with a link to the full report.

Much of the debate over whether North Carolina’s Certificate of Need (“CON”) law should be repealed has focused on market theories without a great deal of focus on measurable realities. Ascendient decided to expand the perspective beyond the ideological arguments and review the data to see if it could draw some conclusions about how a potential repeal of the CON law in North Carolina would affect health care providers and consumers.

Based on an analysis of facts and objective data, we conclude that any move now to deregulate North Carolina’s healthcare system by reducing or eliminating the CON program would be premature and put already vulnerable hospitals at much greater risk as new entrants pick off their best patients without taking up the burden of indigent care.

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FTC Successful Challenge to Hospital Acquisition of Physician Group

In March 2013, the Federal Trade Commission, together with the Idaho Attorney General, filed a complaint seeking to block St. Luke’s Health System’s planned acquisition of Saltzer Medical Group P.A., a multi-specialty physician practice group,  According to the complaint, the combination of St. Luke’s and Saltzer would provide St Luke’s with sufficient market power to demand higher rates for health care services in Nampa, Idaho and surrounding areas, ultimately leading to higher costs for health care consumers.   According to the findings of facts for the case, St. Luke’s and Saltzer combined practices accounted for almost 80 percent of the primary care physicians in the relevant market.  The federal district court ordered St. Luke’s to divest Saltzer’s physicians and assets.

Today (February 10, 2015), the Ninth Circuit upheld the ruling from the lower court and ordered St. Luke’s to unwind its purchase of the practice group.   The court was not swayed by St. Luke’s argument that the acquisition would lead to greater efficiency and quality of care and would help the hospital meets its obligations under healthcare reform.

History of the case is available here.

Parker Poe’s healthcare attorneys advise our healthcare clients regarding a wide range of antitrust matters, including guidance afforded to the healthcare industry as set forth in the Statements of Antitrust Enforcement Policy in Health Care.

Joy Hord

Joy Hord

Joy Hord focuses her practice on regulatory and compliance matters specifically related to the health care industry. Her clients include hospitals, physicians, pharmacies and other health care providers. Ms. Hord also has significant experience representing health care professionals and organizations with business law and transactional issues, such as mergers, acquisitions and joint ventures. Ms. Hord leads Parker Poe’s Health Care Practice, which includes attorneys from the firm’s North Carolina and South Carolina offices.

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