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on zip codes, counties or mileage from specific locations.
Non-competes are regulated by state law including common
law developed through cases adjudicated in each state. There
are wide variations in laws applicable to non-competes. In some
states, they are void, in others fully enforceable, and yet in others
somewhere in between. Physicians should be familiar with their
own state's non-compete laws and be aware that they could be
subject to different (perhaps more stringent) non-compete laws if
they move to another state.

Applicable Laws
In states where non-competes are enforceable (i.e., valid),
non-compete restrictions have generally been upheld so long as
employers can justify a legitimate, protectable business interest
and provide enough evidence to establish the reasonableness of
the non-compete. Some states have codified what is considered
reasonable including the duration and mileage restrictions. In
others, the determination has been left to the courts and can
involve a complex analysis taking into consideration the extent
of restricted activity, an employer's catchment/service area,
population density of the state and/or the locale (e.g., rural
versus large metropolitan area), public policy considerations and
other factors specific to the parties.
In certain states, non-competes are banned and considered
void if included in a contract. California enacted such a ban in
1941 essentially declaring that contract provisions restraining
someone from engaging in a lawful profession, trade or business,
are void (except in the event of sale of a business, dissolution of a
partnership or dissociation of a partner). Oklahoma voids noncompetes so long as the employee does not directly solicit the
employer's established customers. In Idaho only non-competes
with key employees are permitted but must be reasonable. In
Utah non-competes extending for more than one-year postemployment are void (subject to limited exceptions). North
Dakota voids non-competes except in the event of sale of
business goodwill or between partners upon, or in anticipation
of, partnership dissolution.
There has been recent legislative activity in some states newly
seeking to limit non-compete laws. Legislation was introduced
in 2018 in Pennsylvania and Vermont to void non-competes in
a manner akin to California. A bill recently introduced in New
Jersey included a one-year post-employment limitation on noncompetes. While these new initiatives have not yet passed as law,
the trend toward more limitations on non-competes seems to be
gaining ground.

Limitations on Physician Non-Competes
In some states where non-competes are otherwise lawful,
they may not be enforceable against physicians. This has been
the case in Massachusetts since 1977 where contract provisions
are void if they restrict a physician from practicing medicine
in any geographic area for any period after termination of a
partnership, employment or professional relationship. Delaware
and Colorado enacted similar laws in the 1980s although
both of those states permit the imposition of competition
damages (known as liquidated damages). In 2015, New
Mexico enacted a law that resulted in non-compete provisions
being unenforceable against physicians (and other health care
practitioners) unless the agreements are between shareholders,
owners, partners or directors of a practice, although the law
does permit liquidated damages. And, in 2016, Rhode Island
enacted a law like the one in Massachusetts restricting physician
non-competes, but with an exception for the sale and purchase
of a physician practice and limitation on the non-compete for a
maximum of five years.
In some states where non-competes are lawful against
physicians, they may be subject to more stringent requirements
as compared to non-competes generally. This is the case in
Tennessee which allows non-competes for physicians, but
places limits on their duration (2-years post-employment) and
on the restricted geographic area (county of practice or ten
mile maximum from the physician's primary practice location).
In 2016, Connecticut enacted a law allowing physician noncompetes, but only if the physician was terminated by the
employer for cause or if the non-compete was entered into in
conjunction with or in anticipation of partnership or ownership,
and further limiting such non-competes to one-year duration
and fifteen mile maximum from the physician's primary practice
site. Texas allows physician non-competes, but physicians there
must be allowed to buy-out the covenant at a reasonable price,
have access to a list of patients seen within one year of contract
termination and be permitted to continue treating specific
patients for acute illness.

Understanding a Non-Compete
While the landscape seems to be shifting, the continuing
validity of non-competes in most states means they are still a key
issue in physician contract negotiations. As a result, physicians
in "valid" states need to protect themselves and fully understand
the impact of the non-compete included in their contract. This
continued on next page
FALL 2019

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Berks County Medical Society Medical Record Fall 2019

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