Future of Physician Non-Competes

Future of Physician Non-Competes *Update July 1st: House Bill (HB) 843 was signed into law on June 25, 2019. Section 542.336, Florida Statutes, which relates to the restrictive covenants discussed below became effective immediately upon becoming law.

The full version of the bill can be found by clicking the following link: http://laws.flrules.org/2019/138.

Future of Physician Non-Competes
Non-compete clauses and other restrictive covenants are common practice in employment agreements involving physicians. Restrictive covenants are normally permitted in order to protect “legitimate business interests,” so long as the “restraint is reasonably necessary to protect the legitimate business interest.” § 542.335(1)(b)-(c), Fla. Stat. Unlike the evaluation of other provisions in a contract, Florida Statutes expressly require courts to construe these restrictive covenants as protecting legitimate business interests. § 542.335(1)(b), Fla. Stat. To deem a restrictive covenant unenforceable, a court must determine that public policy significantly outweighs the legitimate business interest in enforcing the non-compete clause. § 542.335(g)(4), Fla. Stat.

Among its various components, HB 843 aims to invalidate contractual non-competes entered into by physicians when the entity with which the physician contracts has a contractual relationship (either directly or indirectly) with all physicians in the same specialty within a county. Proposing the creation of a new subsection to Chapter 542 of the Florida Statutes, this bill incorporates language that expressly finds that such restrictive covenants do not promote a legitimate business interest, and further sets forth public policy justifications to invalidate the restrictive covenant. Specifically, the proposed language cites patient’s inability to access their physicians and increased costs. A restrictive covenant under these circumstances is to remain unenforceable for a three-year period following the presence of a new practice in the county which employs one or more physicians within that medical specialty.

This may be important to medical practices in more rural counties in Florida or in relation to certain medical specialties with few practitioners. If signed by Governor DeSantis, the bill will have an effective date of July 1, 2019.