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PHYSICIAN NON-COMPETITION AGREEMENTS


13 August, 2016

"Cooperation, which is the thing we must strive for today, 
begins where competition leaves off."  
~Franklin D. Roosevelt
In 2005, the Tennessee Supreme Court declared the non-competition agreement between internist Dr. David Udom and his former employer Murfreesboro Medical Clinic ("MMC") invalid. In ending a two and a half year legal battle, the court ruled that a patient's need to receive continued care from a preferred physician far outweighed an employer's interests. "The right to choose the physician that one believes is best able to provide care is fundamental. The court cannot allow it to be denied owing to an employer's restrictive covenant," read a statement from the court. As a result, non-competition agreements are generally unenforceable against physicians in Tennessee, who are effectively afforded a "favored nation" status in Tennessee.

This is not the case in Louisiana where attorneys are the only professional group to be afforded favored nation status. According to the Louisiana legislature, the right to choose counsel is deemed fundamental. Hence, non-competition agreements are not enforceable against attorneys in Louisiana.

While this same reasoning could be applied to physicians in Louisiana, as it stands today, non-competition agreements are generally enforceable against physicians in Louisiana. Accordingly, medical employers must consider and weigh both the advantages and disadvantages of such restrictive agreements.

Scope of Non-competition Agreements in the Medical Field

A non-competition agreement typically bars a physician from:

1.  Practicing medicine within a certain distance of the current employer's locations for a defined period of time; and

2. Encouraging or soliciting patients to follow him or her to the new practice.

Advantages to Medical Employers of Non-competition Restrictions:

  • Physicians gain new knowledge, learn new skills, and build their reputation while in practice. Turnover can be expensive for an employer. Non-competition agreements encourage retention and deter employed physicians from leaving their current practices.
  • Non-competition agreements prevent physician employees from becoming direct competitors by typically prohibiting physicians from taking employers' patients elsewhere.
  • Non-competition policies, along with other restrictive covenants, alleviate concerns about stability and retention, while allowing employers to focus on patient services.
  • Non-competition agreements may protect an employer from disparaging remarks or ill practices following an acrimonious departure by requiring a physician to practice outside the protected area of competition.

Disadvantages to Physician Employees of Non-competition Agreements:

  • Non-competition agreements can cause employed physicians stress and hardship. For instance, a required move from a restricted area of competition following termination of employment substantially alters life.
  • Non-competition policies can result in less than ideal workplace dynamics. Employers who believe that employed physicians cannot leave to start their own practices may be less concerned about employee satisfaction and quality of the work environment.
  • Patients may be adversely affected if discouraged or denied the opportunity to continue a preferred patient relationship with an employed physician.

Drafting Enforceable Non-competition Agreements

Though non-competition agreements may not be popular with physician employees, there is certainly a place for them in employment contracts and agreements. Severability clauses can be used to enhance the enforceability of non-competition agreements. These provisions suggest alternative time and location restrictions, allowing practices to move from broad restrictions to site specific and individual specific restrictions. With properly drafted provisions, an employer can balance the needs of a practice with reasonable demands of a potential physician employee, thus supporting the expectations of both business and personal agendas.

Protecting the Best Interest of the Practice While Protecting the “‘Best Practices” of the Physician

Complexities of non-competition agreements expose both employers and employees to pertinent practice and career issues.  Accordingly, it is important to be well advised when negotiating, drafting, defending or challenging non-competition agreements.  Agreements that arise from cooperation, collaboration and clear communication are ultimately more defensible should the need ever arise.

Fortunately, for individuals and medical businesses in Louisiana, Theus Law Offices provides a complete range of business services.  If you are facing an issue with a non-competition agreement and need a Louisiana business attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe or elsewhere, let our business attorneys help you and your business.

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