Should physicians be subject to a different noncompete standards than other professionals? Several states have established laws, through statute and case law, on the topic of physician non-competes, and yet we are still far from a consensus.
- Florida courts will enforce a restrictive covenant against a physician so long as the covenant does not jeopardize public health (for instance if there are not doctors in the applicable markets and specialties).
- In North Carolina, a covenant is lawful if: (1) with the restrictions in place, there is no shortage of similar physicians in the restricted area; (2) it does not create a monopoly in the area of specialty in the restricted area; and (3) it leaves patients with a choice in the selection of a physician. Boice-Willis Clinic, PA v. Seaman, MD, 2005 WL 3470326 (N.C. Ct. App. Dec. 20, 2005).
- Texas law permits noncompetes in employment agreements with physicians, although the covenant must: (a) not deny access to a list of patients seen in the last year; (b) provide access to patient medical records upon patient authorization; (c) provide access to a patient list and medical records in same format as maintained except by mutual consent to the contrary; (d) be subject to buyout at a reasonable price or as determined by an arbitrator; and (e) not prevent treatment of a patient during the course of an acute illness. See Tex. Bus. & Com. Code Section 15.50.(b) .
- Tennessee courts have held noncompetes against physicians to be “inimical to public policy and unenforceable. Public policy considerations such as the right to freedom of choice in physicians, the right to continue an on-going relationship with a physician, and the benefits derived from having an increased number of physicians practicing in any given community all outweigh the business interests of an employer.” Murfreesboro Medical Clinic, PA v. Udom, 166 S.W.3d 674, 683-684 (2005) (collecting cases from multiple jurisdictions that both permit and prohibit noncompetes against physicians).
This past week has seen two (2) more decisions on this topic. Consistent with past decisions on this topic, the cases reach inconsistent results.
- As discussed in an ArgusLeader.com article, in a dispute between Sanford Health and former Sanford Health physician JoAnn Ormand, a court in South Dakota found that a noncompete included in Sanford Health’s “standard physician contracts runs afoul of state law because it has the potential to interfere with the doctor-patient relationship.” Sanford Health is currently looking at grounds to immediately appeal the ruling, the article reports.
- Meanwhile, in Ohio, an appellate court overturned a trial court ruling that declared a non-compete against a physician unenforceable. In holding that the noncompete met all the factors of enforceability, the court wrote, “Covenants not to compete pertaining to physicians are not per se unenforceable pursuant to American Medical Association’s principles of medical ethics or interpretations of those principles. See, e.g., Ohio Urology, Inc. v. Poll (1991), 72 Ohio App.3d 446, 594 N.E.2d 1027; Robert W. Clark, M.D., Inc. v. Mt. Carmel Health (1997), 124 Ohio App.3d 308, 314-15, 706 N.E.2d 336. Although the law does not favor such restrictive covenants, they will be upheld if they are reasonable. Ohio Urology at 453; Clark at 313.” Owusu v. Hope Cancer Ctr. of Northwest Ohio, Inc., 2011 Ohio 4466, Para 23 (2011).
What does this all mean? That there is no substitute for a thorough state-specific analysis of a noncompetition covenant involving a physician. Standard form documents will not suffice, and even the most narrowly tailored noncompete will not survive in some states. I suspect that this area of law will remain unsettled for quite some time, as courts grapple with an ever-changing health law environment.