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Physician’s contracts and noncompete agreements: Watch out for these 2 issues

Noncompete agreements are legal documents meant to help protect an employer from taking the time to train and onboard an employee, in this case a physician, only to have that physician move to join a competing group. When crafted well, these documents can survive a legal challenge. When drafted poorly, a physician or other group could build a successful challenge and the employer could lose their physician — as well as the investment that went into the onboarding process.

The enforceability of these provisions generally hinges on whether the restraints within the noncompete are reasonable to protect the employer’s legitimate interests. These interests can include specialized training as well as confidential business information. If a former employee or other group attempts to challenge a noncompete, the courts often look to the reasonableness of the restrictions. These include the reach of the geographic location and the time limit. In many cases the broader the geographic area, the longer the time period, the harder these agreements are to enforce.

Other issues that can impact the enforceability of noncompete agreements include the following.

Issue #1: The law is evolving

It is important to note that the laws that guide the enforcement of these legal arrangements is evolving. The Biden Administration released an Executive Order on Promoting Competition in the American Economy. This order called on the federal government to crackdown on noncompete agreements in an effort to help promote competition in various markets throughout the country.  Although it did not result in changes to the law, it likely led to increased scrutiny of noncompete agreements. As such, it is important for those who rely on these contracts to regularly review the language to better ensure it is enforceable if challenged.

Issue #2: Texas has some unique rules

Anyone looking to have an enforceable noncompete agreement needs to review applicable state law. In Texas, state law generally requires physicians retain access to patient records upon authorization by the patient. The law also states that the restriction include a buyout option. A failure to follow these and other Texas specific rules can mean the noncompete agreement is not enforceable.

Attorney John Rivas is responsible for this communication