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PHYSICIAN NON-COMPETE
RESTRICTIONS
By: Karen E. Davidson

T

he legal landscape for non-compete restrictions has been
Non-competes are regulated by state law including common law
undergoing change. Legislatures and courts have been taking developed through cases adjudicated in each state. There are wide
a renewed look at these restrictions, and in some cases aggres- variations in laws applicable to non-competes. In some states, they
sively limiting the type and scope of non-competes including those are void, in others fully enforceable, and yet in others somewhere
for physicians. While limitations are springing up, non-competes in between. Physicians should be familiar with their own state's
continue to be valid in most states. As a result, physicians must still non-compete laws and be aware that they could be subject to
be mindful and strategic when entering into contracts containing different (perhaps more stringent) non-compete laws if they move
non-compete clauses.
to another state.

What is a Non-Compete?
Non-competes are a type of contract provision known as a
restrictive covenant which can apply during employment and after
employment ends.1 Non-competes are designed to restrict physicians
from competing by precluding them from working for a competitor,
or setting up a competing medical practice, usually for a specified time
period after employment ends within a designated geographic area.
Most physicians are familiar with non-compete restrictions, having
either agreed to such a restriction in an employment contract or having
sought to impost such a restriction as a business owner to protect
their medical practice. The unfortunate nature of non-competes
is that they can have a significant impact on the professional and
personal lives of physicians because they can preclude a physician
from working for a desired employer in a preferred locale and cause
a physician to have to move a residence with family in tow.

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. California3 enacted such a ban in 1941
essentially declaring that contract provisions restraining someone
Contract provisions for physician non-competes are multi-faceted. from engaging in a lawful profession, trade or business, are void
One feature is a description of the restricted activity which can (except in the event of sale of a business,4 dissolution of a partnership
range from the practice of medicine or specialty to, more broadly, or dissociation of a partner). Oklahoma voids non-competes so long
any activity including consulting or administrative services (e.g., as the employee does5 not directly solicit the employer's established
key employees are
medical directorship) and/or ownership of a practice or facility. customers. In Idaho only non-competes with
6
permitted
but
must
be
reasonable.
In
Utah
non-competes
extendAnother aspect of non-competes is the duration of the restriction
ing
for
more
than
one-year
post-employment
are
void
(subject
to
which typically ranges from one to two years. Some non-competes
7
limited
exceptions).
North
Dakota
voids
non-competes
except
in
identify restricted competitors by name. One of the most critical
the
event
of
sale
of
business
goodwill
or
between
partners
upon,
or
features of non-competes is the designation of the restricted geoin
anticipation
of,
partnership
dissolution.
graphic area which may be based on zip codes, counties or mileage
from specific locations.2
Other types of contractual restrictive covenants include non-solicitation
provisions which restrict a physician from soliciting an employer's patients,
employees or contractual relationships, and non-disclosure provisions which
restrict a physician from disclosing confidential and/or proprietary information.
2
Mileage restrictions are a radius around a point or as the crow flies. On-

1

20 Philadelphia Medicine : Summer 2019

line map tools can be helpful.
3
California Business and Professional Code § 16600 et. seq.
4
15 OK. Stat. §15-219A.
5
Idaho Code §44-2701 et. seq.
6
Utah Code §34-51-201.
7
N.D. Cent. Code §9-08-06.


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