This story was originally published by the Minnesota Reformer.
A Wisconsin-based health system is forcing doctors in Duluth to sign a heavily amended contract or resign, physicians say. The contract includes a noncompete clause, which bars physicians from working at a competing hospital after leaving. An author of Minnesota’s 2023 ban on noncompete agreements says the contract likely violates the law, though labor law experts say it’s unclear how a court might rule.
Aspirus, a health system based out of Wausau, Wis., merged with St. Luke’s Duluth in 2023 and operates 19 hospitals and over 100 outpatient clinics across Wisconsin, Michigan and Minnesota.
The Minnesota Attorney General’s office is now investigating physicians’ complaints and served Aspirus a subpoena Thursday, said Elizabeth Odette, the assistant attorney general who manages the office’s antitrust division.
The office has “enough information for a reasonable basis to investigate” whether Aspirus is violating Minnesota’s noncompete law, Odette said. “Now we just need to gather the information to determine whether there is a violation of law.”
The investigation is still in its preliminary stages, and Thursday was the first time the office reached out to Aspirus.
An Aspirus spokesperson declined to comment in an email.
This is not the first time the health system has faced scrutiny for its labor practices — in 2021, Aspirus paid $1.5 million to settle a class action lawsuit around employees’ retirement plans. Aspirus St. Luke’s is also currently being sued by a Duluth physician in a class action suit alleging wage theft.
The 2023 hospital merger between Aspirus and St. Luke’s is part of a broader trend of health care consolidation. A wide body of research, reviewed by health policy research organization KFF, has shown that health care consolidation has depressed employee wages and led to higher prices but not necessarily better care.
In Minnesota, the “factory style” of modern medicine, a consequence of sweeping health care consolidation, has led doctors at Allina to unionize in 2023. Aspirus physicians have yet to unionize.
‘Very physician-unfriendly and very administration-friendly’
The Reformer reviewed the contracts and drafts of new amendments for two Aspirus physicians, who were granted anonymity because they weren’t authorized to speak to the media and fear retaliation. The amendment includes significant changes to sections on compensation, physician’s duties and termination.
Several physicians were told that failure to sign would be taken as a resignation, according to both physicians who spoke to the Reformer.
“I wouldn’t have signed this if I was looking for a job,” said one physician. She described the amended contract as “very physician-unfriendly and very administration-friendly.” The administration has new power to change work hours and location and how many patients doctors see.
Some physicians are seeing significant pay cuts as part of the process, said another physician.
Minnesota-based physicians are also “upset that they’re going to be shackled to the noncompete,” despite the 2023 state law banning them in new agreements, said the second physician. The contract amendments retained an existing noncompete from the physicians’ previous contract, which was renewed on a yearly basis — and thus also arguably unenforceable because a renewed contract is considered a new agreement, employment lawyers say.
Noncompetes: From Jimmy John’s to hospitals
Noncompetes bar workers from leaving a company and working at a competing company nearby for a period of time; the goal is ostensibly to prevent workers from taking trade secrets and client lists — in this case, patient lists — after leaving.
Noncompetes have emerged as an intensely debated legal and political issue in recent years, especially since Jimmy John’s got sued in 2014 for forcing sandwich makers to sign them. Since then, some legal scholars have defended noncompetes, seeking to rebut research that’s shown how they can suppress wages and innovation.
Workers with noncompetes are partially hamstrung in any pay negotiation — and likely to stay put — because they can’t seek out more lucrative work elsewhere or found a competing company. To help workers and spur innovation, the Biden-era Federal Trade Commission moved to ban noncompetes in 2024, though the ban was immediately blocked in federal courts. In September, the commission dropped the effort for an across-the-board ban and instead is now focusing on targeting specific companies that use noncompetes improperly.
The federal pullback makes Minnesota’s legislation more important for Minnesota workers.
When is a noncompete unenforceable?
Employment lawyers interviewed by the Reformer said that the heavily amended contract makes it a new agreement, voiding the noncompete. Rep. Emma Greenman, DFL-Minneapolis, who co-authored the 2023 legislation, said that she couldn’t think of a way that the Duluth hospital’s noncompete “could be enforceable and legal.”
“Once you change the contract or renew the contract, or once the parties are different, that’s a new contract to need consideration, and this ban would apply to that,” said Greenman, who is an attorney, in an interview.
Even when a noncompete is unenforceable, however, it can spook employees into not seeking new jobs, according to a study from the University of Michigan Law School. Employers will sometimes include unenforceable noncompetes in their contracts because of the chilling effect when workers don’t know their rights.
Bert Black, an attorney who has previously written about Minnesota noncompetes, said the physician noncompete sounds unenforceable, though he cautioned that “you can’t say unequivocally, this is the law,” because Minnesota courts have said little if anything on the subject after 2023.
Regardless of the state’s noncompete ban, noncompete clauses have always been subject to limitations based on factors like reasonableness and impact on consumers.
“That’s especially true with physician noncompetes,” said Rachel Arnow-Richman, a professor of labor law in Florida. “The concern of patient choice and access to health care adds another dimension.”
One of the Northland doctors said they are concerned about their patients. “There’s not enough doctors here to take care of everybody that needs care,” said the physician. “But again, I’m also not sure I want to sign this.”
The effect of banning noncompetes, the physician said, should be that “providers at least have some freedom to quit a lousy job, stay in the community where they live and keep providing care.”
