Non-Compete

Restrictive Covenants in Physician Employment Relationships

Robert W. Horton, Esquire

Bass Berry & Sims PLC

Nashville, TN

Introduction

Most physicians are familiar with non-compete agreements (also referred to as

restrictive covenants or covenants not to compete), whether as employees who have

been asked to sign such an agreement upon beginning a new job, or as practitioners

seeking to enforce such an agreement to protect their medical practices from

competition. Non-compete agreements are often signed in conjunction with physician

employment contracts, or when a physician joins a practice group as an owner. These

agreements typically prohibit a doctor from competing against his or her former practice

within a specific region for a specific amount of time after the relationship with the

practice has ended. Medical practices often employ non-compete agreements to

prohibit new physicians from leaving and setting up a competing practice nearby using

information, training, or patient contacts that were provided by the practice.

There is no nationwide standard governing the enforcement of non-compete

agreements. Rather, the enforcement of non-compete agreements is regulated by state

law and, therefore, differs somewhat from state to state. Although general principles of

contract law apply, additional issues arise when considering non-compete agreements

and particularly physician non-compete agreements. Several states have statutes that

prohibit outright any non-compete agreements in the employment context. Most states

limit the enforcement of non-compete agreements generally in light of public policy

concerns about restricting the ability of individuals to practice a trade or earn a living.

Further, many states apply special rules, either by statute or by case law, to physician

non-competes in light of the unique position the medical profession holds in the public

interest.

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This article begins with a discussion of the types and purposes of non-compete

agreements, as well as the general issues that arise consistently from state to state.

The article then focuses on certain issues that arise specifically in the healthcare

context and how those issues are treated from state to state. Next, the article addresses

certain tactics that proponents of non-compete agreements have used to avoid

obstacles to enforcement, including careful drafting of the scope of restrictions, as well

as the use of choice-of-law and forum selection clauses. The appendix includes a chart

categorizing states according to their treatment of physician non-competes, along with a

brief citation of applicable law.

Overview of Physician Non-Compete Agreements

Healthcare providers in various business forms—whether professional corporations,

limited liability companies, general partnerships, or sole practitioners—might employ a

non-compete agreement when establishing a relationship with a physician. Because this

article deals with non-compete agreements in the employment context, it refers to the

medical practice wishing to enforce a non-compete as the employer, and the physician

being bound by the non-compete as the employee. However, the use of non-compete

agreements in the healthcare field is not limited to the employment relationship. For

example, a hospital might contract with an independent contractor physician for

professional services and ask that physician to agree not to provide similar services

elsewhere.

A solo practitioner who wishes to bring on a new partner to expand his

practice might require the new partner to enter into a non-compete. Finally, a buyer of a

physician’s practice might require the seller to execute a non-compete agreement in

order to protect the value of its purchase of the physician’s goodwill and patient base.

Although a more detailed discussion is outside the scope of this article, healthcare providers should

consult legal counsel if they wish to enter into non-compete agreements with independent contractor

physicians. Some jurisdictions are less likely to enforce a restrictive covenant against independent

contractors, even where such a covenant would be enforced against an employee. Alternatively, a court

might consider such a restriction on a doctor’s right to practice medicine as evidence of an employment

relationship, thus jeopardizing the doctor’s classification as an independent contractor.

Although this article deals exclusively with non-compete agreements in the employment context, it is

important to note that non-compete agreements associated with the sale of a business are generally

The advantages for those seeking enforcement of a non-compete agreement are self-

evident. With the assurance that physician employees will not leave and take a portion

of the employer’s patient base, employers can freely expand their medical practices

(and assist physician employees in doing the same), with the knowledge and comfort

that their investment in such expansion is contractually protected from future

competition by current employees. A practice might also have developed proprietary

business techniques, such as billing or payment methods, that it wants to protect from

use or disclosure if the physician goes elsewhere, especially if the physician has been

involved in managing the practice. Finally, a practice might wish to protect its

investment in the professional training it provides, especially to physicians hired fresh

out of residency with little or no prior experience in a private practice.

On the other hand, non-competes present substantial disadvantages to employees. To

comply with a typical restrictive covenant, the physician may need to move outside the

restricted area, potentially uprooting his or her family and attempting to practice

medicine in a less desirable location. Furthermore, new doctors, who have no

established reputation and thus little bargaining power, may have difficulty negotiating

an employment agreement without such restrictions on their future professional

prospects. By the same token, however, non-compete agreements might enhance

employment opportunities for less experienced doctors, since many employers might

not hire new physicians at all without the protection of a restrictive covenant.

treated with more leeway. For example, if a doctor is a partner or shareholder in a medical practice, a

non-compete agreement executed in conjunction with a buyout of the doctor’s equity interest in the

practice will typically be subject to fewer constraints on enforcement. See, e.g., Wenzell v. Ingrim, 228

P.3d 103 (Alaska 2010) (“Unlike covenants not to compete ancillary to employment contracts, which ‘are

scrutinized with particular care because they are often the product of unequal bargaining power,’ this level

of scrutiny is not applied to covenants ancillary to the sale of a business because the contracting parties

are more likely to be of equal bargaining power.”).

See Mohanty v. St. John Heart Clinic, 866 N.E. 2d 85, 95 (Ill. 2006) (noting that “[r]estrictive covenants

protect the business interests of established physicians and, in this way, encourage them to take on

younger, inexperienced doctors. Accordingly, restrictive covenants can have a positive impact on patient

care.”). But see Eckert v. Lehigh Valley Women’s Med. Specialties, P.C., 2012 Pa. Dist. & Cnty. Dec.

LEXIS 226 (Pa. Common Pleas Ct. Feb. 29, 2012) (finding that physician’s junior position with the

practice and relatively brief duration of employment weighed against enforcement of non-compete).

Enforceability

State courts generally disfavor employment non-competes as a “restraint of trade” and

decline to enforce them against employees absent a showing by the employer of a need

for protection as defined by state case law or statutes. First, the employer must show

that it has a protectable business interest that would justify the restrictive covenant,

beyond a mere desire to avoid competition. Second, the restriction at issue must be

reasonably limited to the specific time period and geographical area necessary to

protect the employer’s legitimate interest. Because restrictive covenants are generally

disfavored, courts will interpret restrictions narrowly and will construe ambiguities in

favor of the employee.

Even if a non-compete agreement otherwise meets the

requirements of a legally enforceable, binding contract, courts will nevertheless only

enforce the agreement to the extent that the employer can show it has a legally

recognized, protectable business interest, and that the restrictions on the employee are

necessary to protect that interest.

Legitimate Business Interest

In considering whether to enforce non-compete agreements, courts generally recognize

three “protectable interests” that an employer may demonstrate to justify enforcement:

(1) confidential information; (2) investment in specialized training provided to the

employee; and (3) customer or client relationships. The first such protectable interest is

the employer’s confidential information, including trade secrets.

For example, in General Surgery, P.A. v. Suppes, 953 P.2d 1055 (Kan. Ct. App. 1998), a restrictive

covenant read that “The Doctor agrees that should she cease employment with the Corporation, then she

will not engage in the practice of medicine” within 25 miles of the city limits of Lawrence, KS, for two years

(emphasis added). Stating that “[n]oncompetition covenants included in employment contracts are strictly

construed against the employer,” the court interpreted the phrase “should she cease employment” to

mean that the restrictive covenant applied only where the physician herself took action to end the

employment relationship, and therefore declined to enforce the agreement where the physician did not

voluntarily quit, but was fired. Id. at 1057.

Where an employer has established and maintained a body of proprietary information

and has taken reasonable steps to keep that information from being publicly used or

disclosed, it may be permitted to protect that information via a restrictive covenant. This

issue arises often in the context of trade secrets. Protectable employer trade secrets

can include business plans, product designs, marketing strategies, cost and profit

margins, and information about customers or clients. Where an employee, in the scope

of performing her duties, has had access to the employer’s confidential information,

courts generally conclude that the employee’s use of that information to compete with

the former employer results in unfair competition. As a result, a restrictive covenant

prohibiting the former employee from engaging in such competition will generally be

enforced to the extent necessary to protect that information.

Employers also often

utilize confidentiality agreements, in addition to non-compete agreements, to protect

proprietary information. In fact, the use of confidentiality agreements is often considered

a factor in demonstrating that the employer has taken “reasonable precautions” to keep

the information at issue private.

In the healthcare field, an employer will typically have protectable proprietary

information in only a few specific circumstances. The most “valuable” information to a

physician is most often the patient health information—including medical history, family

history, even personal needs and idiosyncrasies—that is essential in providing effective

care. This class of information, however, is typically treated as belonging to the patient,

and not to the doctor or medical practice providing treatment.

Thus, it is unlikely that an

employer will be able to enforce a restrictive covenant against a departing physician

solely for the purpose of protecting “proprietary” patient information. If an employer has

developed proprietary information that does not relate directly to patients, however,

For example, when the confidential information at issue is subject to change over time (such as pricing

information in a volatile market), the information in the former employee’s possession will likely become

obsolete sooner, justifying a shorter restrictive covenant. See, e.g., Girtman & Assocs. v. St. Amour, 26

I.E.R. Cas. (BNA) 187, at *20-21 (Tenn. Ct. App. 2007); CDX Holdings, Inc. v. Heddon, 2012 U.S. Dist.

LEXIS 86041, at *25 (N.D. Tex. Mar. 2, 2012) (finding that plaintiff failed to show one-year limitation was

reasonable where “confidential information was continually changing and updated and had potentially a

short shelf life”).

For example, the Health Insurance Portability and Accountability Act of 1996 requires healthcare

providers to protect the privacy of patient health information and limits use and disclosure of such

information without the patient’s consent.

such information could still form the basis for a restrictive covenant in certain

circumstances. For example, if a physician is employed in an administrative or

executive capacity and has responsibility for business operations in addition to, or in lieu

of, patient care, the employer may be able to establish that certain information

developed solely for business use is confidential and proprietary. Consequently, to

protect such information, the employer may be able to restrain the physician from

working in an executive or administrative capacity for a competing practice, even where

a restraint on direct patient care would be impermissible.

The second protectable interest commonly recognized by state courts is the employer’s

investment in specialized training provided to the employee. To obtain enforcement of a

non-compete based on specialized training, an employer must typically establish that it

provided more than simple “on-the-job” training of the type the employee would have

received from any employer in the industry. Rather, the employer must provide training

of a unique character, which would provide an unfair advantage if the employee were to

leave and use that training on behalf of a competitor.

This occurs most often where the

employer has invested substantial resources in assisting the employee in developing

professional skills. In the healthcare field, this standard means that an employer can

enforce a restrictive covenant if it shows that it provided a physician with valuable

See, e.g., Blue Ridge Anesthesia & Critical Care v. Gidick, 389 S.E.2d 467, 469 (Va. 1990) (citing as a

protectable interest a physician’s knowledge about employer’s methods of operation). Cf. Patient First

Med. Grp., LLC v. Blanco, 83 Va. Cir. 3, 5 (Va. Cir. Ct. 2011) (“The covenant in this case is overbroad

because its reach is not limited to occupations and businesses that are in competition with Patient First. It

bars indirect involvement by the defendant in ‘perform[ing] medical services of the type he performed for

Patient First,’ even as a shareholder. This would prohibit the defendant from owning stock in a publicly

traded company if some part of that company provided the same medical services as the defendant . . . .

[B]arring one from being a stockholder in a publicly traded company is virtually inherently overbroad.”);

Lasership, Inc. v. Watson, 79 Va. Cir. 205, 212 (Va. Cir. Ct. 2009) (“[A] covenant not to compete is

functionally overbroad and unenforceable if it prevents an employee from working for companies not in

competition with the former employer or it prevents an employee from pursuing noncompeting

employment positions with any employer.”).

The analysis of whether training is sufficiently “unique” may often collapse into the analysis of whether

the content of the training qualifies as protected confidential information. Thus, if an employer provides an

employee with specialized training based on information it keeps private and from which it derives a

competitive advantage, the employer can demonstrate that a restrictive covenant is necessary to protect

both its confidential information and its investment in specialized training.

professional training that was essential in developing the physician’s current

marketability and earning power.

The third interest commonly recognized by courts to justify enforcement of a non-

compete agreement is the protection of customer or client relationships. The personal

relationships and “goodwill” cultivated between an employee and the employer’s

customers are generally considered the property of the employer. Non-compete

agreements are often sought where the employee has ongoing contact with customers

over a prolonged time period, such that she becomes the “face of the company” to

those customers. As a result, many states allow an employer to protect those customer

relationships with a non-compete agreement, on the ground that it would be unfair to

allow the employee to compete with his former employer using customer relationships

that he cultivated on his former employer’s behalf and at his former employer’s

expense. In the healthcare context, this rule equates with a medical practice’s interest in

protecting its patient base, when most patients associate the medical practice with their

personal physician. Although the “ownership” of the patient-doctor relationship raises

public policy issues discussed below, it has been recognized in several states as a

legitimate interest justifying the enforcement of a non-compete agreement.

See, e.g., Community Hosp. Grp., Inc. v. Moore, 869 A.2d 884 (N.J. 2005), and Pierson v. Medical

Health Ctrs., PA, 869 A.2d 901 (N.J. 2005), in which the New Jersey Supreme Court held that an

employer’s investment in the training of a physician (among other items) was a legitimate interest

protectable by a non-compete agreement; see also Weber v. Tillman, 913 P.2d 84, 92 (Kan. 1996)

(finding a protectable interest based on employer’s investment in setting up its practice and in recruiting

and training defendant employee; and noting that the employee “acknowledged that he had benefitted by

beginning his career in an established practice rather than starting his own.”); St. Clair Med., PC v.

Borgiel, 270 Mich. App. 260, 266 (2006) (emphasis added) (“In a medical setting, a restrictive covenant

can protect against unfair competition by preventing the loss of patients to departing physicians,

protecting an employer’s investment in specialized training of a physician, or protecting an employer’s

confidential business information or patient lists.”).

See, e.g., A&T Med. Inc. v. Mercadante, 2011 Pa. Dist. & Cnty. Dec. LEXIS 200 (Pa. Common Pleas

Ct. Feb. 28, 2011) (“[R]etaining patients is a compelling interest as is their interest in preventing existing

and former employees from establishing a competing medical practice using their current patients.”); Blue

Ridge Anesthesia, 389 S.E.2d at 469 (citing “customer” contacts as a protectable interest for a medical

practice); Saliterman v. Finney, 361 N.W.175 (Minn. Ct. App. 1985) (“[Minnesota] has long recognized the

uniquely vulnerable goodwill of patients which belongs to the owner of a medical practice”); Sharvelle v.

Magnante, 836 N.E.2d 432, 437 (Ind. Ct. App. 2005) (recognizing a clinic’s legitimate interest in “its good

will, its established patient base, and the time and resources spent to build its practice”); Weber, 913 P.2d

at 91 (recognizing “referral sources” as a legitimate business interest); Prairie Eye Ctr., Ltd. v. Butler, 713

N.E.2d 610, 614-15 (Ill. Ct. App. 1999) (eye clinic has protectable interest in retaining patients treated by

its employees); Mohanty, 866 N.E.2d at 93 (rejecting former employee’s argument that physician non-

Reasonable Restrictions

In addition to establishing a protectable business interest, an employer seeking to

enforce a non-compete agreement must also show that the restrictions in place are no

greater than what is reasonably necessary to protect its business. Courts generally

require that a post-employment restriction be reasonably limited with respect to its

geographical scope and its duration. Even where a protectable business interest exists,

courts will often decline to enforce a restriction if it covers a territory that is broader than

necessary to protect the employer’s business, or if it lasts longer than necessary to

protect that interest.

A non-compete agreement cannot be unlimited in scope. Rather, restrictions on post-

employment conduct are typically enforced only within a reasonable geographical area.

When considering whether a territorial restriction is reasonably limited, courts will most

often consider the size of the employer’s market and the size of the area serviced by the

employee. Thus, a medical practice that draws patients from a limited area will not be

able to prohibit a physician from treating patients outside that area, while a practice with

a more regional scope might be able to enforce a broader restriction. “Reasonableness”

is typically determined on a case-by-case basis, and therefore there can be substantial

variation even within one state as to what restrictions are considered reasonable. Other

relevant factors include the number of customers (or patients) existing within a specific

region, the presence of other competitors within that region, and the scope of the

employer’s efforts to market itself within a specific region. For example, a restriction

from practicing medicine within “a 10-mile radius” of the employer’s office might be

enforceable in a rural area where there are a limited number of patients within the

restricted territory, while the same restriction might be unenforceable in an urban area

compete agreements infringed on the doctor-patient relationship and interfered with patient’s right to be

treated by doctor of choice).

where it restricts the physician from treating thousands of potential patients and where

other competing medical practices already exist.

Because these factors are considered on a case-by-case basis, parties should look to

specific examples in court decisions to determine whether a desired restriction will be

considered reasonable. Permissible methods of defining a reasonable territorial

limitation include: (1) “radius” restrictions like the one discussed above, in which the

employer’s place of business is treated as a compass point and the employee is

restricted from competing within a certain number of miles from that point; (2) zip code

areas (typically zip codes within which a certain minimum number of the employer’s

customers originate); and (3) municipal boundaries such as cities or counties. Courts

will generally require a sufficient degree of specificity, so as to provide an employee

adequate notice as to where competition is prohibited. For example, in Louisiana, a

restriction prohibiting the employee from competing “in the Greater New Orleans area”

was held to be vague and, therefore, unenforceable.

In addition to a reasonable territorial limitation, non-compete restrictions must typically

expire within a reasonable period of time to be enforced. Most non-compete

agreements prohibit competition during the employment relationship and for a period of

months or years afterward. If a court decides that the restriction lasts longer than

necessary to protect the employer’s legitimate interest, it will decline to enforce the

restriction. For example, a court might limit the duration of a non-compete restriction to

the amount of time: (1) needed for the employer to hire and train a replacement

employee; (2) it will take so that customers no longer associate the former employee

with the employer’s business; (3) necessary to prove to the employer’s customers that it

can continue to meet their needs in the absence of the former employee; or (4)

Lawyers should note, however, that when viewed from the standpoint of the employee, the opposite

argument can be made: a 10-mile radius limitation can effectively freeze a physician out of an entire rural

or suburban area, while the same restriction in an urban area could, depending on geographical

circumstances, leave the employee with a sufficient patient base and thus allow him to earn a living.

Medivision, Inc. v. Germer, 617 So.2d 69 (La. Ct. App. 1993) (citing LA. REV. STAT. 23:921 (permitting

restrictive covenants only within a “specified parish or parishes, municipality or municipalities, or parts

thereof.”)); see also West Carroll Health Sys., LLC v. Tilmon, 92 So. 3d 1131 (La. App. Ct. 2012)

(reversing trial court’s enforcement of a non-competition agreement against a physician’s assistant that

extended to a named parish and “other surrounding parishes” on the basis that the geographic restriction

was too broad).

necessary for any confidential information in the employee’s possession to become

obsolete. As with reasonable territorial restrictions, this determination is typically made

on a case-by-case basis, and parties should look to applicable court decisions in

deciding what type of restriction to apply. In addition to these factors, some state non-

compete statutes include express provisions establishing how long a non-compete

restriction can last.

When examining a non-compete covenant, courts may also compare the scope of

prohibited activities with the services actually provided by the former employee during

the employment relationship. If the restriction effectively precludes the employee from

doing work other than what she did for the former employer, the court may find the

restriction unduly broad. For example, if an employee worked for the employer solely as

a sales representative, a court might refuse to enjoin the employee from going to work

for a competitor if the employee’s new role with the competitor has nothing to do with

sales. Thus, the restrictions included in a physician non-compete agreement should

relate directly to the services provided by the physician on behalf of the employer. For

example, a surgical practice group could prohibit a former member from practicing

surgery as he had for the group, but could not prevent the member from practicing

medicine in a specialty other than that of the practice group.

In many instances, a court will recognize that the employer has a protectable interest at

stake but conclude that the restriction on the former employee is nevertheless overly

broad. In such instances, a court might simply decline to enforce the agreement, or in

Florida establishes a statutory presumption that an employment non-compete restriction is reasonable

if the term is less than six months, and unreasonable if it lasts longer than two years.

FLA. STAT.

§ 542.335(1)(d)(1); see also M

O. REV. STAT. § 431.202 (establishing conclusive presumption of

reasonableness if the term of postemployment restrictive covenant is no more than one year); L

A. REV.

STAT. ANN. § 23:921(c) (“not to exceed two years from termination of employment”); OR. REV. STAT. §

653.295 (“may not exceed two years from the date of the employee’s termination”); TENN. CODE ANN. §

63-1-148(a)(1)(B) (“two (2) years or less”).

See, e.g., Fox Valley Thoracic Surgical Assocs., S.C. v. Ferrante, 747 N.W.2d 527 (Wis. Ct. App. 2008)

(upholding the lower court’s conclusion that a non-compete provision was overbroad because, among

other reasons, the restriction prohibited the surgeon from practicing thoracic medicine, in addition to heart

surgery). But see Fairfield Cnty. Bariatrics v. Ehrlich, 2010 Conn. Super. LEXIS 568 (Conn. Super. Ct.

Mar. 8, 2010) (enforcing a non-compete agreement prohibiting bariatric surgeon from practicing medicine

for two years in a 15-mile radius, and practicing bariatric surgery for two years in several named towns;

finding in part that operation of the covenant need not impair the public’s need to secure the surgeon’s

services so substantially as to require invalidation).

those states in which the “blue pencil” or “reasonableness” rule is in effect, the court

may narrow the terms of the restriction to make it consistent with applicable law. The

so-called blue pencil rule means a judge may decide that a non-compete agreement is

too broad as written, but instead of rejecting the provision entirely, he or she will cross

out the unreasonable sections with a hypothetical “blue pencil” and will enforce the

provisions that remain.

In strict “blue pencil” states, courts will not supply missing

terms or otherwise reformulate an overly broad provision to bring it into compliance. The

provision deemed unlawful must be severable from the remainder of the agreement,

and an enforceable restriction must remain after the offending provision is stricken. For

example, if an agreement provided that a physician was restricted from practicing

medicine “in Jones County and in Smith County,” a court in a blue pencil jurisdiction

might find that the restriction was not justified as to Smith County because the employer

had not established a sufficient patient base there. Consequently, the court would strike

the phrase “and in Smith County” and enforce the restriction as to Jones County only.

On the other hand, in states that employ the “reformation” or “rule of reason” standard,

instead of simply striking overly broad provisions, a court will effectively rewrite the

offending provision(s) and enforce the agreement as modified. For example, if a judge

finds that a two-year, 25-mile restriction is overly broad, he might enforce the restriction

only for one year and only up to 10 miles.

As discussed below in more detail,

employers drafting non-compete agreements should determine if their jurisdiction

employs the “blue pencil” or “reformation” standard (or neither), and draft restrictions

accordingly.

State Law Prohibiting or Limiting Physician Non-Compete Agreements

As discussed above, non-compete agreements are typically disfavored in the

employment context, and many states have statutes that generally prohibit all such

See, e.g., Class Action Claim Servs., LLC v. Clark, 892 So.2d 595, 600 (La. Ct. App. 2004).

See, e.g., Cent. Ind. Podiatry, P.C. v. Krueger, 882 N.E.2d 723 (Ind. 2008) (finding that a restriction

covering 43 counties was overbroad, but enforcing the restriction as to three of the counties).

agreements as a matter of law.

Other states have statutes that restrict enforcement of

employee non-compete agreements and establish factors that will be considered in

determining whether those agreements are reasonable.

In most states, there is no

statute governing enforceability, but court decisions have established the relevant

factors to be considered. Some states, such as Delaware and Massachusetts, do not

prohibit employee non-competes generally but will decline to enforce them against

physicians. Still other states, such as Virginia, Tennessee, and Texas, do not prohibit

physician non-competes but apply stricter standards to such agreements than they do

to employee non-competes in general.

Many statutes governing physician non-competes have been enacted in response to

court decisions announcing special standards with respect to such agreements. For

example, in 2005, the Supreme Court of Tennessee, in contrast to several prior court

decisions, held that covenants not to compete are unenforceable against physicians

except in special circumstances established by statute.

In response to that decision, a

law was passed in 2007 that expressly provided for the enforcement of physician non-

compete agreements provided that the restrictions meet certain statutory limitations.

The Virginia Supreme Court ruled in 2007 that a medical practice, which had converted

from a professional corporation to a general corporation upon the death of a physician

shareholder, did not have a legitimate interest in enforcing a non-competition provision

against a former employee, because the corporation did not hold a medical license and

thus could not be “engaged in the practice of medicine.”

This ruling effectively

Those states include California, Montana, North Dakota, and South Dakota.

Such states include Florida, Idaho, Michigan, Oregon, and Georgia. Please see the appendix for

specific statutory citations.

Murfreesboro Med. Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005). At the time of the

Murfreesboro Med. Clinic case, Tennessee statutes only expressly permitted physician non-compete

agreements if the employer was a hospital, an affiliate of a hospital, or a faculty practice plan associated

with a medical school. See T

ENN. CODE ANN. § 63-6-204(f).

TENN. CODE ANN. § 63-1-148. The statute was amended in 2010 and again in 2011. The 2011

amendment removed limitations on the enforceability of non-compete covenants against physicians who

have been employed for longer than six years. Previously, a non-compete covenant could not extend

beyond six years without the parties agreeing to renew it in writing based on additional negotiations and

fresh consideration (and even then, for no longer than an additional six-year period, which could again be

renewed by the same process). In addition, the 2011 amendment also extended the applicability of T

ENN.

CODE ANN. § 63-1-148 to osteopathic physicians.

Parikh v. Family Care Ctr., Inc., 641 S.E.2d 98 (Va. 2007). At the time of this decision, the applicable

statute provided for enforcement of physician non-compete agreements by those “engaged in the practice

invalidated non-compete agreements with nonprofessional corporations and any entity

that did not hold a medical license. In response, the Virginia legislature amended the

statute in 2008 to clarify that professional corporations and limited liability companies

are entitled to enforce non-compete agreements.

Public Policy Issues Arising from Physician Non-Compete Agreements

Many states treat physician non-competes differently than similar agreements in other

fields, due to the special public interest associated with the medical profession. For

example, when asked to enforce a physician non-compete agreement, courts may

consider additional factors such as whether enforcement will cause a shortage of

doctors in a particular region, or within a particular specialty.

In addition, some states

may apply different standards to different medical specialties.

Furthermore, some

courts give great weight to the right of citizens to obtain treatment from the physician of

their choice, concluding that the doctor-patient relationship trumps any interest an

of medicine.” This issue arises in connection with the so-called corporate practice of medicine doctrine.

For example, a doctor might sign a restrictive covenant as a wholly owned professional corporation,

rather than in an individual capacity. The restriction, however, might still be enforced against both the

professional corporation and against the physician in an individual capacity. See, e.g., Regional Urology,

L.L.C. v. Price, 966 So.2d 1087 (La. Ct. App. 2007) (affirming that a non-compete agreement was

enforceable against a physician even though the contract was technically with his wholly owned

professional corporation; and stating that “a juridical person, such as a corporation, is distinct from its

members. However, the privilege of separate corporate identity is not without limits . . . [the physician’s]

argument that he is not individually bound because his professional medical corporation was the

independent contractor are attempts to circumvent his contractual obligations under the noncompetition

agreement. . . . [The physician] is the controlling party with regard to his medical practice, regardless of its

formation as a corporate entity”).

VA. CODE ANN. § 54.1-111(D).

See, e.g., Emerick v. Cardiac Study Ctr., Inc., 286 P.3d 689 (Wash. Ct. App. 2012) (“Public policy

requires a court to consider possible harm to the public from enforcing the covenant. Such harm may

include restraint of trade, limits on employment opportunities, and denial of public access to necessary

services. But the court must still balance these concerns against the employer’s right to protect his

business.”); Board of Regents v. Warren, 2008 Iowa App. LEXIS 1192 (Iowa Ct. App. 2008) (unpublished)

(finding a non-compete agreement overbroad where it prohibited physician from practicing any medicine,

not just oncology, and because the physician’s practice was in an area suffering from a shortage of

oncologists, making enforcement detrimental to the public interest). See also, e.g., Akkad v. Neb. Heart

Inst., P.C., 2012 Neb. App. LEXIS 82 (Neb. Ct. App. Apr. 10, 2012); Wenzell v. Ingrim, 228 P.3d 103

(Alaska 2010), Dick v. Geist, 693 P.2d 1133 (Idaho App. 1985); Iredell Digestive Disease Clinic, P.A. v.

Petrozza, 373 S.E.2d 449 (N.C. Ct. App. 1988).

For example, a Tennessee non-compete statute permitting physician non-competes, and establishing

guidelines for enforceability, does not apply to physicians who specialize in emergency medicine. T

ENN.

CODE ANN. § 63-1-148.

employer might have in protecting its patient base. The American Medical Association’s

(AMA’s) code of medical ethics, for similar reasons, disfavors non-compete agreements,

stating that they restrict competition, disrupt continuity of care, and potentially deprive

the public of access to medical care. AMA does not state that non-compete agreements

are per se unethical, but instead concludes that they are unethical if they “fail to make

reasonable accommodation of patients’ choice of physician.”

In considering these issues as factors governing whether a physician restriction was

reasonable, the New Jersey Supreme Court has held:

Significant here is the demand for the services rendered by the employee

and the likelihood that those services could be provided by other

physicians already practicing in the area. If enforcement of the covenant

would result in a shortage of physicians within the area in question, then

the court must determine whether this shortage would be alleviated by

new physicians establishing practices in the area. It should examine also

the degree to which enforcement of the covenant would foreclose resort to

the services of the ‘departing’ physician by those of his patients who might

otherwise desire to seek him out at his new location. If the geographical

dimensions of the covenant make it impossible, as a practical matter, for

existing patients to continue treatment, then the trial court should consider

the advisability of restricting the covenant’s geographical scope in light of

the number of patients who would be so restricted.

For these reasons, many states will not enforce physician non-compete agreements

where they are viewed as restricting patients’ rights to choose their own doctor.

Even

See Opinion 9.02, “Restrictive Covenants and the Practice of Medicine,” available at www.ama-

assn.org/ama/pub/physician-resources/medical-ethics/code-medical-ethics/opinion902.page.

Community Hosp. Grp., Inc. v. More, 869 A.2d 884, 898 (N.J. 2008).

See, e.g., Valley Med. Specialists v. Farber, 982 P.2d 1277 (Ariz. 1999) (finding that a restrictive

covenant prohibiting a physician from providing any and all forms of “medical care,” including

pulmonology, emergency medicine, brachytherapy treatment, and human immunodeficiency virus-

positive and acquired immune deficiency syndrome patient care, for three years within a five-mile radius

of any office maintained or utilized by the employer practice was unreasonable and unenforceable; the

where the non-compete agreement is otherwise enforceable, in many instances courts

will construe the restriction so as not to prohibit patients from independently seeking out

treatment by the departing physician.

Moreover, states often draw a distinction

between restrictions on the right to practice medicine and restrictions on owning or

operating a business, which do not raise the same policy concerns about patient care.

For example, a non-compete agreement could be drafted explicitly to preserve the

physician’s right to see patients, but to restrict the physician from owning or operating a

practice similar to that of the employer.

Even where states have no broad rules governing enforcement of physician non-

competes, the same factors may weigh in a public policy analysis in the overall

determination of whether an individual restriction is reasonable. Such factors might

include: (1) whether enforcement of the restriction will create an effective monopoly on

medical services (either with respect to the area of specialty or the provision of

healthcare services generally) within the restricted area; (2) whether the restriction

would prevent the area from having a physician available at all times to handle medical

emergencies; (3) whether patients will be able to continue a course of treatment without

disruption; (4) whether the physician’s termination was caused by the employer or by

the physician herself; (5) whether the employer seeks to gain an unfair competitive

advantage by enforcement of the restriction; and (6) whether employment opportunities

for the physician exist outside the restricted area.

practice’s protectable interests were minimal compared to the patients’ right to see the doctor of their

choice, which was entitled to substantial protection); Intermountain Eye & Laser Ctrs., PLLC v. Miller, 127

P.3d 121, 132 (Idaho 2005) (declining to establish a categorical ban on physician non-competes but

holding that the employer’s protectable interest “is limited by those patients’ interest in continuity of care

and access to the health provider of their choice. . . . [T]he public interest in freedom of contract must be

balanced against the public interest in upholding the highly personal relationship between the physician

and his or her patient.”). But see, e.g., Owusu v. Hope Cancer Ctr. of Northwest Ohio, Inc., 2011 Ohio

4466 (Ohio Ct. App. 2011) (“Ohio courts have repeatedly rejected the argument that covenants are not

enforceable against physicians solely because it impairs the patient’s choice.”).

Ohio recently enacted legislation requiring healthcare entities to send “notice of the termination of a

physician’s employment to each patient who received physician services from the physician in the two-

year period immediately preceding the date of employment termination.” O

HIO REV. CODE § 4731.228.

See, e.g., TEX. BUS. & COM. CODE § 15.50 (providing that the restraints placed on physician non-

competes do not “apply to a physician’s business ownership interest in a licensed hospital or licensed

ambulatory surgical center”).

If any of the foregoing factors weigh against enforcement of the non-compete

agreement, the court may rule that the entire non-compete agreement is null and void,

or it may narrow the restriction and enforce it as modified.

Special Considerations Under Contract Law

Even if an agreement meets the special requirements applicable to restrictive

covenants, it must also comply with general principles of contract law. First, because

employment agreements containing non-compete restrictions typically exceed one year

in duration, such agreements should be in writing as required by applicable statutes of

frauds. Second, the agreement must be supported by adequate consideration.

If a

non-compete restriction is included as a provision in an employment contract, then in

most cases, the initial offer of employment itself will be deemed adequate consideration

for the restriction.

However, if the restriction is not included in the original employment

agreement but it is added (by amendment or supplement) to an existing agreement with

no additional benefit to the employee, then it may be unenforceable for lack of

consideration. Some courts do not view “continued” at-will employment as sufficient

consideration to justify enforcement of a non-compete agreement. Thus, an agreement

that is not executed until after employment has begun might only be enforced if the

employer provides additional compensation or benefits at the time of execution, or

extends employment for a definite term.

See, e.g., Calhoun v. WHA Med. Clinic, PLLC, 632 S.E.2d 563, 571 (N.C. Ct. App. 2006) (stating that

“Under North Carolina law, covenants not to compete are valid and enforceable if: . . . (3) based on

valuable consideration . . . This Court has held ‘the promise of new employment is valuable consideration

and will support an otherwise valid covenant not to compete contained in the initial contract.’ However,

‘when the employment relationship is established before the covenant not to compete is executed, there

must be separate consideration to support the covenant, such as a pay raise or other employment

benefits or advantages for the employee.’”) (internal citations omitted).

Because an at-will employee can be discharged at any time and has no guarantee of continued

employment, some states hold that an employer’s offer of at-will employment, without more, is not

adequate consideration to support a restrictive covenant. See, e.g., CRC-Evans Pipeline Int’l, Inc. v.

Myers, 927 S.W.2d 259, 263 (Tex. Ct. App. 1996); Burgess v. Permian Court Reporters, Inc., 864 S.W.2d

725, 727-28 (Tex. Ct. App. 1993).

See, e.g., Diederich Ins. Agency, LLC v. Smith, 952 N.E.2d 165, 168 (Ill. Ct. App. 2011); Preston v.

Marathon Oil Co., 2012 WY 66, 86 (Wyo. 2012); CRC-Evans Pipeline Int’l, Inc. v. Myers, 927 S.W.2d 259,

263 (Tex. Ct. App. 1996); Burgess v. Permian Court Reporters, Inc., 864 S.W.2d 725, 727-28 (Tex. Ct.

App. 1993); see also, e.g., Freeman v. Duluth Clinic, Ltd., 334 N.W. 2d 626 (Minn. 1983); Calhoun v.

Choice-of-Law and Choice-of-Venue Provisions

In general, contracting parties are permitted to choose the terms of enforcement for

their agreement. Thus, many non-compete agreements will contain a provision stating

that the agreement will be construed according to the laws of a state chosen by the

parties (i.e., a “choice-of-law” provision), or that any disputes over the agreement will be

litigated in a certain place (i.e., a “choice-of-venue” or “forum-selection” provision). Many

employers, in seeking the best chances of enforcement, will insert choice-of-law and

choice-of-venue provisions for a jurisdiction that treats non-compete agreements more

favorably. Most states will enforce choice-of-law and forum-selection provisions as long

as the chosen jurisdiction bears a reasonable relationship to the agreement. In practical

terms, this means that the chosen jurisdiction will be the employer’s place of business,

or more likely, where the employee is expected to be working. This issue arises most

often when an employer that operates in more than one state enters into a non-compete

agreement with an employee located in a state other than the employer’s primary place

of business. In such circumstances, the employer may favor a clause requiring

enforcement in the state that treats non-compete agreements most favorably, while the

employee will favor a clause providing for enforcement in the state with more employee-

friendly rules.

Employers should not assume, however, that a choice-of-law provision will permit them

to avoid unfavorable state law in their efforts to enforce non-compete agreements. Many

states that disfavor non-compete agreements also decline to enforce choice-of-law and

venue provisions, when enforcement would conflict with the state’s public policy against

non-competes.

This issue often leads to a so-called race to the courthouse between

WHA Med. Clinic, PLLC, 632 S.E.2d 563, 571 (N.C. Ct. App. 2006). Of note, Senate Bill No. 353,

introduced in the Hawaii Senate on January 18, 2013, would prohibit “any covenant or agreement that is

executed by an employee or agent after the commencement of employment or term of agency as a

condition of employment or continued employment.”

See, e.g., Bunker Hill Int’l, Ltd. v. Nationsbuilder Ins. Servs., 309 Ga. App. 503, 508 (Ga. Ct. App. 2011)

(“It follows that the agreement’s forum-selection provision is void because its application would likely

result in the enforcement by an Illinois court of at least one covenant in violation of Georgia public

policy.”); Bell v. Rimkus Consulting Grp., Inc. of La., 983 So.2d 927, 933 (La. Ct. App. 2008) (“Application

of Texas Law to this dispute would thwart Louisiana’s longstanding public policy” to “prohibit or severely

restrict non-competition provisions in employment agreements which curtail an employee’s right to earn

his livelihood.”); Beilfuss v. Huffy Corp., 685 N.W.2d 373 (Wis. Ct. App. 2004) (declining to enforce Ohio

employers seeking to enforce non-compete agreements and former employees seeking

to have them declared unenforceable. If lawsuits arising from the same dispute are filed

in different states, courts will generally defer to the state in which the lawsuit was filed

first. This standard is commonly known as the “first-to-file” rule.

In many instances, parties can anticipate that a dispute over a non-compete agreement

will arise. Often, an employer has sent a “cease-and-desist” letter alleging a violation

and requesting that the former employee stop conducting business in alleged breach of

the agreement. In such circumstances, the employer has an incentive to file suit in its

forum of choice (typically the state in which the choice-of-law and choice-of-venue

provisions apply) as soon as possible, so as not to be preempted by the former

employee, who has a similar incentive to file a declaratory judgment action as soon as

possible in his forum of choice (typically another state in which an employee resides or

is conducting business) seeking to have the non-compete invalidated. Whichever party

files suit first has a greater chance of having the non-compete agreement construed

under the laws of his chosen state. These incentives tend to encourage parties to

litigate when the enforceability of a non-compete agreement is at issue.

The winner of the race to the courthouse does not always prevail. Sometimes, a state

may enforce an out-of-state forum-selection clause or choice-of-law provision despite its

own strong policy against restrictive covenants.

In a somewhat surprising decision, the

California Supreme Court refused to enjoin an employer’s pending action in Minnesota

to enforce a non-compete agreement, despite the fact that the employee had filed suit

first in California seeking a declaratory judgment to invalidate the agreement. California

choice of law and choice of venue provisions, because enforcement would violate Wisconsin’s public

policy controlling non-competes); Frame v. Merrill Lynch, 20 Cal. App. 3d 688, 673, 97 Cal. Rptr. 811

(Cal. Ct. App. 1971) (refusing to enforce New York choice-of-law clause contained in restrictive covenant

agreement because to do so would violate California’s strong public policy against such covenants); Wolff

v. Protégé Sys., Inc., 506 S.E.2d 429, 434 (Ga. 1998) (declining to apply out-of-state law where such

application would violate Georgia public policy).

Although sometimes used interchangeably by courts and lawyers, parties should be careful to

distinguish a choice-of-law provision, which provides for the body of law to be applied in interpreting an

agreement, from a forum-selection clause, which establishes the location at which disputes will be

litigated.

has a strong policy against the enforcement of non-compete agreements,

and had

generally declined to enforce out-of-state choice-of-law and venue provisions.

However, in Advanced Bionics, Inc. v. Medtronic,

an employee, then located in

Minnesota, entered into a non-compete agreement with his employer, also located in

Minnesota. The agreement contained a provision requiring the agreement to be

construed under Minnesota law, and required that all disputes arising under the

agreement to be litigated in Minnesota. The employee then resigned after obtaining

employment with a competitor in California. The employee and the new employer filed a

declaratory judgment in California seeking to have the non-compete agreement

invalidated. The former employer filed an action in Minnesota the next day, seeking

enforcement of the agreement. After competing restraining orders had been issued in

each court (with the California trial court going so far as to enjoin the Minnesota

lawsuit), the California Supreme Court heard the employer’s appeal of the California

action. The supreme court reversed the lower court’s decision to enjoin proceedings in

Minnesota. Although the stated basis for its holding was simply that the California court

could not enjoin an out-of-state proceeding, the supreme court recognized that there are

circumstances in which a California court may not be entitled to take jurisdiction over a

non-compete agreement executed between two non-residents. Concurring justices

opined that despite California’s strong public policy against enforcement of non-

compete agreements, the choice of law factors weighed heavily in favor of Minnesota

jurisdiction over the dispute: the parties to the contract were located in Minnesota, and

the contract itself provided for the application of Minnesota law and that all disputes

would be litigated in Minnesota. The California court’s holding gives some indication that

choice-of-law and venue provisions will be honored if one state’s interest predominates.

CAL. BUS. & PROF. CODE § 16600 prohibits all employee non-compete agreements.

29 Cal. 4th 697 (Cal. 2002).

Drafting Issues and Practice Tips

There are several common contract issues that take on greater significance in drafting

and negotiating restrictive covenants. First, although strict prohibitions on competition

are subject to special considerations as discussed above, parties may be able to obtain

more leeway by the use of liquidated damages provisions or a “buy-out” requirement for

a departing physician who wishes to set up a competing practice. For example, an

employment agreement might provide that if a departing physician practices medicine

within the same zip code as the employer within one year of leaving the practice, the

physician must “buy” the practice’s goodwill by paying $25,000. Where a departing

physician is not strictly prohibited from competing but is instead required to make some

stipulated payment if she chooses to compete, a court might be more willing to enforce

such a provision.

In effect, the parties are permitted to agree ahead of time on the

“price” of post-employment competition. Although liquidated damages clauses and buy-

out options have essentially the same economic effect as an affirmative restriction (the

departing physician pays some monetary penalty in the event that he competes with his

former employer), buy-out clauses indicate a choice on the part of the departing

physician, whereas liquidated damages provisions also specifically anticipate the

possibility that the employee might engage in competition in the future.

As with all contracts, a liquidated damages provision in a non-compete agreement

cannot constitute a penalty but must have some relationship to actual, anticipated

damages.

Delaware and Colorado statutes, for example, limit enforcement of

See, e.g., Sisters of Charity Health Sys., Inc., 21 A.3d 110 (Me. 2011) (citing Brignull v. Albert, 666

A.2d 82, 84 (Me. 1995)) (enforcing $100,000 liquated damages clause against physicians for breach of

two-year, 25-mile restrictive covenant); Hightower v. Midwest Orthopedic Inst., P.C., 782 N.E.2d 1006,

1012 (Ind. Ct. App. 2003) (suggesting that a non-compete would be enforceable that required the

departing doctor to forfeit all claims to any accounts receivable of the employer if he competed during the

restricted time period).

See Wichita Clinic, P.A. v. Louis, 185 P.3d 946, 956 (Ct. App. Kan. 2008) (stating that “a liquidated

damages provision will be enforced if (1) the amount stipulated is reasonable in view of the value of the

subject matter of the contract and of the probable or presumptive loss if a party breaches the contract,

and (2) the nature of the transaction is such that actual damages resulting from the breach would not be

easily or readily determinable . . . . To recover liquidated damages, the amount must have some

reasonable relationship to the actual injury caused by the breach; if there is no relationship, the provision

is a penalty”). Of note, in Tennessee, a physician whose practice has been purchased by a hospital or

hospital affiliate must be given an opportunity to “buy back the physician’s medical practice for the original

purchase price of the practice, or, in the alternative, if the parties agree in writing, at a price not to exceed

physician non-competes, but expressly provide for reasonable liquidated damages

provisions.

Rather than relying on the limitations imposed by law, in negotiating an employment

contract a physician employee should attempt to make sure that the restrictions on the

right to practice medicine are as narrow as possible. For example, the physician might

request an exception to the restrictive covenant if his employment is terminated without

cause, on the grounds that the employee should not have his employment options

limited through no fault of his own. Furthermore, when a physician already has an

established patient base before entering into employment, she should attempt to

preserve the right to continue seeing those patients after employment has ended.

An employer, on the other hand, will want to be able to enforce the contractual

restrictions in as many circumstances as possible, regardless of the reason for the

physician’s departure from the practice. Terminations can occur for many reasons that

do not rise to the level of “cause” for termination, as that term is typically defined. Those

reasons could include unsatisfactory performance, personality issues, or other factors

that would not necessarily diminish an employer’s interest in enforcing a post-

employment restriction. In fact, if a practice has to fire a physician, it would likely wish to

rely on its negotiated right to restrict that physician’s ability to engage in conduct

potentially detrimental to the employer’s business.

In addition to the foregoing, employers drafting a non-compete agreement should

include a provision authorizing a reviewing court to modify the post-employment

restrictions to the extent the court finds them overly broad or unreasonable. In

“reformation” or “rule of reason” states, this provision permits employers to save an

otherwise unenforceable restriction and still obtain enforcement of a narrower one. Non-

the fair market value of the practice at the time of the buy back, at which time any such restriction on

practice shall be void.” T

ENN. CODE. ANN. § 63-6-2014(A)(iii)(a).

6 DEL. CODE § 2707; COLO. REV. STAT. § 8-2-113(3).

Restrictions on hiring away other employees are often treated more favorably by courts than

categorical restrictions on practicing medicine in a certain area. Although restrictions on the solicitation of

patients are subject to many of the same public policy concerns raised above, courts are generally more

willing to enforce non-solicitation-of-patients provisions, on the ground that those restrictions are narrower

in scope than a blanket non-compete. Consequently, many employment agreements contain non-

solicitation provisions in addition to non-compete provisions.

compete agreements should also include a “severability” clause providing that if one

clause or section of the agreement is found to be unenforceable, the parties intend for

the remaining provisions to be enforced as written. This provision authorizes courts to

“blue pencil” unreasonable provisions, and helps preserve the remainder of an

employment agreement that might include many important provisions other than a

restrictive covenant. However, even with these sorts of provisions, many states will

simply refuse to enforce a restrictive covenant deemed unreasonable as a matter of

law.

Finally, employers should include in a non-compete agreement a provision stating that if

the agreement is breached, the employer is entitled to recover the attorneys’ fees it

incurs in seeking enforcement. As should be apparent to the reader by now, the issues

surrounding enforcement of physician non-compete agreements are varied and

complex. In addition, because of the irreparable harm associated with non-compete

violations and the “race to the courthouse” that often occurs, parties often need

significant legal help on the front end of a dispute. As a result, attorneys’ fees can

accumulate quickly before the issue of enforcement is even resolved. An attorneys’ fees

provision allows a party to recover those costs and also can provide a significant

element of damages in the event the agreement is enforced.

An employee, on the other hand, should resist any “one-sided” attorneys’ fees provision.

Employees should instead insist on a provision awarding attorneys’ fees to the

“prevailing party” in any dispute over enforcement, or for a provision specifically

providing attorneys’ fees to the employee in the event that the agreement is declared

unenforceable or if the employer does not obtain a substantial portion of the relief

requested in any suit for enforcement.

See Valley Med. Specialists, 982 P.2d at 1286.

Resources

The appendix contains a table listing states with statutes specifically governing

physician non-competes, statutes governing non-competes generally, and a summary

of applicable case law in states with no such statutes. This information is current as of

December 2012. Please note that case citations and blurbs represent only a sampling

and are not intended to be exhaustive.

See the appendix on the next page.

Appendix – Table of Statutes and Case Law by State

I. STATES WITH STATUTES SPECIFICALLY REGARDING PHYSICIAN

RESTRICTIVE COVENANTS

STATE &

STATUTE

STATUTE LANGUAGE

Colorado

OLO. REV. S

TAT.

§ 8-2-113

Any covenant not to compete provision of an employment, partnership, or

corporate agreement between physicians which restricts the right of a physician

to practice medicine, as defined in section 12

-36-

106, C.R.S., upon termination

of such agreement, shall be void; except that all other provisions of such an

agreement enforceable at law, including provisions which require the payment

of damages in an amount that is reasonably related to the injury suffered by

reason of termination of the agreement, shall be enforceable. Provisions which

require the payment of damages upon termination of the agreement may

include, but not be limited to, damages related to competition.

Massachusetts

ASS. GEN. L

H. 112, §

12X

Any contract or agreement which creates or establishes the terms of a

partnership, employment, or

any other form of professional relationship with a

physician registered to practice medicine pursuant to section two, which

includes any restriction of the right of such physician to practice medicine in

any geographic area for any period of time after the termination of such

partnership, employment or professional relationship shall be void and

unenforceable with respect to said restriction; provided, however, that nothing

herein shall render void or unenforceable the remaining provisions of any such

cont

ract or agreement.

Delaware

DEL. CODE A

NN.

§ 2707

Any covenant not to compete provision of an employment, partnership or

corporate agreement between and/or among physicians which restricts the

right of a physician to practice medicine in a particular locale and/or for a

defined period of time, upon the termination of the principal agreement of which

the said provision is a part, shall be void; except that all other provisions of

such an agreement shall be enforceable at law, including provisions which

require the payment of damages in an amount that is reasonably related to the

injury suffered by reason of termination of the principal agreement. Provisions

which require the payment of damages upon termination of the principal

agreement may include, but not be limited to, damages related to competition.

Tennessee

ENN. CODE ANN.

ENN. CODE ANN. § 63-1-148:

STATE &

STATUTE

STATUTE LANGUAGE

§§ 63-1-148, 68-

11-205, 63-

204(f)(2)

(a)

(1)

A restriction on the right of an employed or contracted healthcare

provider to practice the healthcare provider’s profession upon termination or

conclusion of the employment or contractual relationship shall be deemed

reasonable if:

(A)

The restriction is set forth in an employment agreement or other written

document signed by the healthcare provider and the employing or contracting

entity; and

(B) The duration of the restriction is two (2) years or less and either:

(i) The maximum allowable geographic restriction is the greater of:

(a) A ten-mile radius from the pri

mary practice site of the healthcare

provider while employed or contracted; or

(b)

The county in which the primary practice of the healthcare provider

while employed or contracted is located; or

(ii) There is no geographic restrictio

n, but the healthcare provider is

restricted from practicing the healthcare provider’s profession at any facility at

which the employing or contracting entity provided services while the

healthcare provider was employed or contracted with the employing or

contracting entity.

(b)

An agreement entered into in conjunction with the purchase or sale of a

healthcare provider’s practice, or all or substantially all of the assets of the

healthcare provider’s practice, may restrict the healthcare provider’s right to

practice the healthcare provider’s profession; provided, that the duration of the

restriction and the allowable area of the restriction are reasonable under the

circumstances. There shall be a rebuttable presumption that the duration and

area of restriction agreed upon by the parties in such an agreement are

reasonable.

(c)

This section shall apply to healthcare providers licensed under chapters 3,

4, 5, 6, 8, 9 and 11 of this title.

(d)

This section shall not apply to physicians who specialize in the p

ractice of

emergency medicine.

ENN

. CODE ANN. § 68-11-205:

STATE &

STATUTE

STATUTE LANGUAGE

(b) (2) Employing entities

shall not restrict the employed physician’s right to

practice medicine upon the termination or conclusion of the employment

relationship, except as allowed by

§ 63-6-204(f)(2).

(3)

Notwithstanding subdivision (b)(2), in the event that the employment

contract with a physician employed independently of a bona fide practice

purchase is terminated by the employing entity for reasons other than breach

by the employee

, any such restrictions shall be void.

TENN

. CODE ANN. § 63-6-204(f)(2):

(f)(2) Employing entities

shall not restrict the employed physician’s right to

practice medicine upon the termination or conclusion of the employment

relationship, except as follow

(A) For physicians from whom the employing entity has made a bona fide

purchase of the physician’s practice, the employing entity may impose

reasonable geographic restrictions upon the employed physician’s practice;

provided, that:

(i) The maximum allowable area of the restriction is the greater of:

(a) The county in which the primary practice site is located; or

(b) A ten (10) mile radius from the primary practice site;

(ii) The duration of the restri

ction is two (2) years or less, unless a longer

period,

not to exceed five (5) years, is determined by mutual agreement of the parties

in writing to be necessary to comply with federal statutes, rules, regulations, or

IRS revenue rulings or private lette

r rulings;

(iii) Any employment agreement or medical practice sale agreement

restricting the right of a physician to practice shall:

“‘Employing entity’” means a hospital licensed under this chapter or title 33, chapter 2, or an affiliate of

such an entity that employs one or more physicians. ‘Employing entity’ does not mean, however, a health

maintenance organization licensed under title 56, chapter 32. T

ENN. CODE ANN. § 68-11-205(e)(4)(A).

“‘Employing entity’ means a hospital licensed under title 68, chapter 11, or title 33, chapter 2, or an

affiliate of such an entity, that employs one or more physicians. ‘Employing entity’ does not mean,

however, a health maintenance organization licensed under title 56, chapter 32.” T

ENN CODE ANN. § 63-6-

204(f)(7)(D).

STATE &

STATUTE

STATUTE LANGUAGE

(a) Allow the physician to buy back the physician’s medical practice for

the original purchase price

of the practice, or, in the alternative, if the parties

agree in writing, at a price not to exceed the fair market value of the practice at

the time of the buy back, at which time any such restriction on practice shall be

void; and

(b) Not require that the physician give more than thirty-

day’s notice to

exercise the repurchase option; provided, that this provision shall not otherwise

affect the contract termination notice requirements; and

(iv) If the buy back provision is dependent

upon a determination of the fair

market value of the practice, the contract shall specify the method of

determining fair market value by independent appraisal, in the event that the

parties cannot agree as to the fair market value. The contract shall also include

the following language:

“In the event that the employing entity and the physician cannot agree

upon the fair market value of the practice within ten (10) business days of the

physician’s notice of intent to repurchase the practice, the physician may

remove any contractual restrictions upon the physician’s practice by tendering

to the employing entity the amount that was paid to the physician for the

practice. The employing entity or the physician may then seek a determination

of the fair

market value of the practice by the independent appraisal method

specified by contract.”

(B) For physicians employed independently of a bona fide practice

purchase, employing entities shall not restrict the employed physician’s right to

practice medicine upon the termination or conclusion of the employment

relationship, except as allowed by § 63

-1-148 or any successor section.

Texas

EX. BUS. & C

OM.

ODE

§ 15.50(b)-

(c); T

EX. GOV

’T

ODE §

848.101(c)

TEX

. BUS. & COM. CODE § 15.50(b)-(c):

(b) A covenant not to compete relating to the practice of medicine is

enforceable against a person licensed as a physician by the Texas Medical

Board if such covenant complies with the following requirements:

(1) the covenant must:

(A) not deny the phys

ician access to a list of his patients whom he had

seen or treated within one year of termination of the contract or employment;

STATE &

STATUTE

STATUTE LANGUAGE

(B) provide access to medical records of the physician’s patients upon

authorization of the patient and any copies of medical records for a reasonable

fee as established by the Texas State Board of Medical Examiners under

Section 159.008, Occupations Code; and

records after termination of the contract or employment shall not require such

list or records to be provided in a format different than that by which such

records are maintained except by mutual consent of the parties to the contract;

(2) the covenant must provide for a buy out of the

covenant by the physician

at a reasonable price or, at the option of either party, as determined by a

mutually agreed upon arbitrator or, in the case of an inability to agree, an

arbitrator of the court whose decision shall be binding on the parties; and

(3) the covenant must provide that the physician will not be prohibited from

providing continuing care and treatment to a specific patient or patients during

the course of an acute illness even after the contract or employment has been

terminated.

(c)

Subsection (b) does not apply to a physician’s business ownership interest

in a licensed hospital or licensed ambulatory surgical center.

TEX

. GOV’T CODE § 848.101(c):

prohibit

a physician from providing medical services or participating in another

health care collaborative.

Virginia

A. CODE §

54.1-

111(D)

D. Nothing in this section, nor §§ 13.1

-543, 13.1-1102, 54.1-

2902, and 54.1-

2929, shall be construed to prohibit or prevent any entity of a type listed in §

13.1

-542.1 or 13.1-

1101.1, which employs or contracts with an individual

licensed by a health regulatory board, from (i) practicing or engaging in the

practice of a profession or occupation for which such individual is

licensed, (ii)

providing or rendering professional services related thereto through the

licensed individual, or (iii) having a legitimate interest in enforcing the terms of

employment or its contract with the licensed individual.

VA. CODE § 54.1-

111(D).

A covenant not to compete between an employer and an employee will be

enforced if the covenant is narrowly written to protect the employer’s legitimate

business interest, is not unduly burdensome on the employee’s ability to earn a

STATE &

STATUTE

STATUTE LANGUAGE

living, and does not violate public policy. Restrictive covenants are disfavored

restraints on trade and, therefore, the employer bears the burden of proof and

any ambiguities in the contract will be construed in favor of the employee.

Parikh v. Family Care Ctr., Inc.

, 273 Va. 284, 288 (Va. 2007).

II. STATES WITH STATUTES GENERALLY CONCERNING EMPLOYEE

RESTRICTIVE COVENANTS

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

Alabama

LA. CODE § 8

-1-1

Every contract by which anyone is

restrained from exercising a lawful

profession, trade, or business of any

kind otherwise than is provided by this

section is to that extent void. A

LA.

ODE § 8-1-1(a).

Exceptions:

(1) sale of the good will

of a business; (2) in connection with an

employment relationship; or (3) upon

or in anticipation of dissolution of the

partnership. A

LA. CODE § 8-1-1(b)–

(c).

Section 8

-1-

1(a) places a broad

general ban on every contract that

restrains anyone from exercising a

lawful profession. There are only “two

exceptions [Sections 8

-1-

1(b) and (c)]

to this otherwise uncompromising

provision.” Walker Reg’l Med. Ctr., Inc.

v. McDonald, 775 So. 2d 169, 171

(Ala. 2000).

The practice of medicine is a

profession under the terms of this

statute. However, the inclusion of a

covenant not to compete in a contract

does not necessarily render void the

entire contract. The statute itself

provides that a contract containing a

covenant not to compete “is to that

extent void.” The contract remains

otherwise valid. Therefore, the entire

agreement in this case was not made

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

void by the fact that it included the

disputed clause. Salisbury v. Semple,

565 So. 2d 234, 236 (Ala. 1990).

Not every contract

that

imposes a

restraint on trade or competition is

void. The fact that a contract may

affect a few or several individuals

engaged in a like business does not

render it void under

ALA. CODE § 8

-1-1

(1975). Every contract to some extent

injures other parties; that is, it

necessarily prevents others from

making the sale or sales

consummated by such contract. The

court held that the fact that

Southeast’s physicians are denied

staff privileges at certain facilities did

not restrain them from practicing their

profession in violation of § 8

-1-1,

ALA.

ODE 1975.

Southeast Cancer

Network, P.C. v. DCH Healthcare

Auth., Inc.

, 869 So. 2d 452,

458 (Ala.

2003).

It is well settled in Alabama that to the

extent a contract restrains the practice

of a lawful profession, it is void, under

§ 8

-1-

1(a), as against public policy.

There is universal agreement that the

law looks with disfavor upon contracts

that

restrain employment. A contract

that

requires the payment of damages

in the event one of the contracting

parties competes with the other is a

contract “by which . . . one is

restrained from exercising a lawful

profession.” Anniston Urologic

Assocs., P.C. v. Kline, 689 So. 2d 54,

57 (Ala. 1997).

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

California

AL. BUS. & P

ROF.

ODE §§

16600 –

16602.5

Except as provided in this chapter,

every contract by which anyone is

restrained from engaging in a lawful

profession, trade, or business of any

kind is to that extent void.

CAL. BUS

. &

ROF. CODE § 16600.

Exceptions:

(1)

sale of goodwill or

corporate shares; (2) the

dissolution of

the partnership or dissociation of the

partner from the partnership; or (3)

agreements by members of LLCs not

to carry on similar business within

specified locality so long as any other

member of the limited liability company

carries on a like business. C

AL. BUS

. &

ROF. CODE §§ 16600–16602.5.

CAL. BUS. & PROF. CODE § 16600

presently sets out the general rule in

lifornia—

covenants not to compete

are void. This provision is an

expression of public policy to ensure

that every citizen shall retain the right

to pursue any lawful employment and

enterprise of their choice.

CAL. BUS

. &

ROF. CODE

§§ 16600 and 16601 do

not exclude professional medical

corporations. Hill Med. Corp. v.

Wycoff, 2001 Cal. App. LEXIS 58 (Cal.

App. 2d Dist. 2001).

Hill Med. Corp.

, the court concluded

that the covenant not to compete at

issue was void and unenforceable. As

defendant’s professional practice

consisted solely of providing radiology

and associated medical imaging

services, the noncompetition provision

effectively excluded him from the

practice of his profession and was

void. Substantial evidence supported

the trial court’s finding that the

covenant not to compete did not fall

within the exception of §

16601. This

was not a situation in which an

otherwise valid covenant covered an

unreasonably large geographical area

or was unreasonably long in duration.

Since there had been no

compensation for goodwill, it was

impossible to re

write this void

covenant. To re

write the covenant

would have undermined California’s

public policy of open competition as

set forth in § 16600.

Id.

District of

Columbia

Every contract, combination in the

form of a trust or otherwise, or

Deutsch v. Barsky, 795 A.2d 669, 674

(D.C. 2002) (holding that covenant not

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

D.C. CODE § 28-

4502

conspiracy in restraint of trade or

commerce all or any part of which is

within the District of Columbia is

declared to be illegal.

to compete between dentists was not

per se

violation of public policy;

restraint must be no greater than

necessary to protect a legitimate

business interest);

Erikson v. Hawley,

56 App. D.C. 268, 12 F.2d 491 (D.C.

Cir. 1926) (upholding preliminary

injunction restraining orthodontist from

violating restrictive covenant).

Florida

FLA. STAT

§ 542.335

Notwithstanding s. 542.18 and

subsection (2), enforcement of

contracts that restrict or prohibit

competition during or after the term of

restrictive covenants, so long as such

contracts are reasonable in time, area,

and line of business, is not prohibited.

So long as the covenant not to

compete fits within the parameters of

FLA

. STAT

. ch. 542.335 (1999), it may

be enforced by the injunctive power of

the courts. One applying for a

temporary injunction to enforce a

noncompete agreement must show,

among other things, a likelihood of

success on the merits. The person

against whom the injunction is sought

may offer as a defense that the

moving party has materially breached

the contract. If the employee

introduces evidence of the employer’s

breach, as the employee is entitled to

do pursuant to

FLA. STAT

. ch.

542.335(g)3 (1999), the employer

must then demonstrate that it is likely

to succeed on the merits of the

proffered defense, as well. Supinski v.

Omni Healthcare, 853 So. 2d 526 (Fla.

Dist. Ct. App. 5th Dist. 2003).

Where a non

competition restraint is

neither six months or less, nor more

than two years in duration, it is neither

presumed reasonable nor

unreasonable.

FLA. STAT.

ch.

542.335(1)(h) (2003) directs that a

court shall construe a restrictive

covenant in favor of providing

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

reasonable protection to all legitimate

business interests established by the

person seeking enforcement.

Southernmost Foot & Ankle

Specialists v. Torregrosa, 891 So. 2d

591 (Fla. Dist. Ct. App. 3d Dist. 2004).

In Florida, the enforceability of

restrictive covenants is controlled in

large part by

FLA. STAT

. § 542.335

(2004). Under §

542.335, a restrictive

covenant is not enforceable unless

supported by a legitimate business

interest. If the party seeking to enforce

the restrictive covenant pleads and

proves a legitimate business interest,

it must also then demonstrate that the

contractually specified restraint is

reasonably necessary to protect its

identified business interest. With

respect to patients of a medical

practice,

FLA. STAT

. § 542.335 (2004)

expressly defines “legitimate business

interest” to include only those specific

prospective or existing patients with

whom a party has a substantial

relationship.

Florida

Hematology &

Oncology v. Tummala, 927 So. 2d 135

(Fla. Dist. Ct. App. 5th Dist. 2006).

Georgia

A. CONST.

Art.

III, Sec. VI, Par.

V(c)1; G

A. C

ODE

NN. § 13-8-

50 et

seq.

In 2010, Georgia voted to amend its

Constitution which forbade the state’s

legislature, the General Assembly,

from authorizing restrictive covenants.

A. CONST.

Art. III, Sec. VI, Par.

V(c)(1)). The amendment granted the

General Assembly the power to enact

laws providing for the enforcement of

agreements restricting or regulating

certain competitive activities. As a

result of the amendment, the General

Assembly enacted the Georgia

The RCA only applies to restrictive

covenant agreements entered into

after May 11, 2011. Becham v.

Crosslink Orthopaedics, 482 F. App’x

387 (11th Cir. 2011).

Prior to the enactment of the RCA,

Georgia courts generally treated

restrictive covenants in physicians’

employment contracts like such

clauses in other employment

contracts—if they were sufficiently

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

Restrictive Covenants Act (“RCA”).

(a) Enforcement of contracts that

restrict competition during the term of

a restrictive covenant, so long as such

restrictions are reasonable in time,

geographic area, and scope of

prohibited activities, shall be permitted.

However, enforcement of contracts

that restrict competition after the term

of employment [as distinguished from

a customer nonsolicitation provision or

a nondisclosure of confidential

information provision in Ga. Code.

Ann. §

13-8-

53(b) and (e),

respectively] shall not be permitted

against any employee who does not, in

the course of his or her employment:

(1)

Customarily and regularly solicit

for the employer customers or

prospective customers;

(2)

Customarily and regularly engage

in making sales or obtaining orders or

contracts for products or services to be

performed by others;

(3)

Perform the following duties:

(A)

Have a primary duty of

managing the enterprise in which the

employee is employed or of a

customarily recognized department or

subdivision thereof;

(B)

Customarily and regularly

direct the work of two or more other

employees; and

(C)

Have the authority to hire or

fire other employees or have particular

weight given to suggestions and

limited and reasonable, considering

the interest to be protected and the

effects on both parties to the contract,

they were upheld. See Pittman v.

Coosa Med. Grp., P.C., 300 Ga. App.

529 (Ga. Ct. App. 2009); see also

Peachtree Fayette Women’s

Specialists, LLC v. Turner, 699 S.E.2d

69 (Ga. Ct. App. 2010) (declining to

enforce a restrictive covenant that

prohibited physician from providing

obstetric and gynecological services in

a geographic area where she had

never worked during her employment

and where her former employer did

not maintain an office); Keeley v.

Cardiovascular Surgical Assocs., 510

S.E.2d 880 (Ga. Ct. App. 1999)

(finding that in order to be enforceable,

a non

compete covenant must be

reasonably necessary to protect the

interests of the party in whose favor it

is imposed); Augusta Eye Ctr. v.

Duplessie, 506 S.E.2d 242 (Ga. Ct.

App. 1998) (finding tha

t one-

year

duration of a non

competition clause is

well within the time frame permitted by

law).

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

recommendations as to the hiring,

firing, advancement, promotion, or any

other change of status of other

employees; or

(4)

rform the duties of a key

employee or of a professional.

(b)

Notwithstanding any other

provision of this chapter, an employee

may agree in writing for the benefit of

an employer to refrain, for a stated

period of time following termination,

from soliciting, or attempting to solicit,

directly or by assisting others, any

business from any of such employer’s

customers, including actively seeking

prospective customers, with whom the

employee had material contact during

his or her employment for purposes of

providing products or services that are

competitive with those provided by the

employer’s business. No express

reference to geographic area or the

types of products or services

considered to be competitive shall be

required in order for the restraint to be

enforceable. Any reference to a

prohibition against “soliciting or

attempting to solicit business from

customers” or similar language shall

be adequate for such purpose and

narrowly construed to apply only to: (1)

such of the employer’s customers,

including actively sought prospective

customers, with whom the employee

had material contact; and (2) products

or services that are competitive with

those provided by the employer’s

business.

(e) Nothing in this article shall be

construed to limit the period of time for

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

which a party may agree to maintain

information as confidential or as a

trade secret, or to limit the geographic

area within which such information

must be kept confidential or as a trade

secret, for so long as the information

or material remains confidential or a

trade secret, as applicable.

Hawaii

AW. REV. S

TAT.

§ 480-

4(c)

It shall be lawful for a person to enter

into any of the following restrictive

covenants or agreements ancillary to a

legitimate purpose not violative of this

chapter, unless the effect thereof may

be substantially to lessen competition

or to tend to create a monopoly in any

line of commerce in any section of the

State:

(1)

A covenant or agreement by the

transferor of a business not to

compete within a reasonable area and

within a reasonable period of time in

connection with the sale of the

business;

(2)

A covenant or agreement

between partners not to compete with

the partnership within a reasonable

area and for a reasonable period of

time upon the withdrawal of a partner

from the partnership;

(3)

A covenant or agreement of the

lessee to be restricted in the use of the

leased premises to certain business or

agricultural uses, or covenant or

agreement of the lessee to be

restricted in the use of the leased

premises to certain business uses and

of the lessor to be restricted in the use

of premises reasonably proximate to

Technicolor, Inc. v. Traeger, 57 Haw.

113, 551 P.2d 163 (1976) (holding that

a restrictive covenant is “not

reasonable” if (1) it is greater than

required for the protection of the

employer; (2) it imposes undue

hardship on the person being

restricted; or (3) injury to the public

outweighs the benefit to the

employer);

UARCO, Inc. v. Lam

., 18 F.

Supp. 2d 1116, 1121 (D. Haw. 1998)

(“[F]or restrictive covenants that are

not

per se

illegal, courts should

determine as a matter of law whether

a restrictive covenant is reasonable.

‘In making this analysis, the court must

examine such factors as geographical

scope, length of time, and breadth of

the restriction placed on a given

activity.’”).

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

any such leased premises to certain

business uses;

(4)

A covenant or agreement by an

employee or agent not to use the trade

secrets of the employer or principal in

competition with the employee’s or

agent’s employer or principal, during

the term of the agency or thereafter, or

after the termination of employment,

within such time as may be reasonably

necessary for the protection of the

employer or principal, without imposing

undue hardship on the employee or

agent.

**Pending Legislation:

S.B. No. 353,

introduced in the Hawaii Senate on

January 18, 2013, would prohibit “any

covenant or agreement that is

executed by an employee or agent

after the commencement of

employment or term of agency as a

condition of employment or continued

employment.”

Idaho

IDAHO

CODE

§ 44-

2701 et seq.

A key employee or key independent

contractor may enter into a written

agreement or covenant that protects

the employer’s legitimate business

interests and prohibits the key

employee or key independent

contractor from engaging in

employment or a line of business that

is in direct competition with the

employer’s business after termination

of employment, and the same shall be

enforceable, if the agreement or

covenant is reasonable as to its

duration, geographical area, type of

employment or line of business, and

does not impose a greater restraint

The Idaho Supreme Court addressed

physician non

competes in

Intermountain Eye & Laser Ctrs. v.

Miller, 127 P.3d 121 (Idaho 2005),

which was decided prior to the

enactment of

IDAHO CODE § 44-

2701 et

seq. (2008).

Intermountain Eye &

Laser Centers

, the court found:

A non

competition provision must be

no more restrictive than necessary to

protect the interest or interests at

issue. Non

competitive activity is

generally not protectable, at least in

the medical profession. When

considering the degree to which a

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

than is reasonably necessary to

protect the employer’s legitimate

business interests.

IDAHO CODE §

44-

2701.

“Key employees” and “key

independent contractors” shall include

those employees or independent

contractors who, by reason of the

employer’s investment of time, money,

trust, exposure to the public, or

exposure to technologies, intellectual

property, business plans, business

processes and methods of operation,

customers, vendors or other business

relationships during the course of

employment, have gained a high level

of inside knowledge, influence,

credibility, notoriety, fame, reputation

or public persona as a representative

or spokesperson of the employer, and

as a result, have the ability to harm or

threaten an employer’s legitimate

business interests.

IDAHO CODE §

44-

2702(1).

particular non-compete provision

affects the “public interest,” courts

focus on both the general public’s

interest in access to care, and the

patients’ interests in continuity of care

and access to the physician of their

choice.

Id.

Medical services firms, particularly

those providing specialized care,

generally have protectable interests in

referral sources.

Id.

Doctor

patient relationships are

different from most other relationships

between service providers and their

customers. While the public has a

strong interest in freedom of contract,

that interest must be balanced against

the public interest in upholding the

highly personal relationship between

the physician and his or her patient.

While doctor

patient relationships are

somewhat analogous to attorney

client

relationships, requiring closer scrutiny

than other c

onsumer-

provider

relationships, regulating the practice of

law is the business of the court;

regulating the practice of medicine is

not. For that reason, an outright ban is

unwise. Instead, the reasonableness

of a particular non

compete provision

should be

left to the finder of fact in

light of the interests involved.

Id.

Louisiana

LA. REV. STAT

NN.

§ 23:921(c)

Any person, including a corporation

and the individual shareholders of

such corporation, who is employed as

an agent, servant, or employee may

agree with his employer to refrain from

carrying on or engaging in a business

similar to that of the employer and/or

In Kimball v. Anesthesia Specialists of

Baton Rouge, Inc., 809 So. 2d 405

(La. Ct. App. 2001), the plaintiff, a

physician, former employee, and

shareholder of an incorporated

anesthesiology provider, filed suit

against defendants, the corporation

STATE &

STATUTE

STATUTE LANGUAGE CASE LAW

from soliciting customers of the

employer within a specified parish or

parishes, municipality or municipalities,

or parts thereof, so long as the

employer carries on a like business

therein, not to exceed a period of two

years from termination of employment.

and the individual

doctors/shareholders of the

corporation, following his termination

from employment. The court of

appeals found that the non

-com

pete

clause of plaintiff’s employment

contract was unenforceable as it failed

to conform to

LA. REV. STAT. ANN

. §

23:921(C) by not specifying

geographic restrictions.