Non compete agreements for all types and ranks of employees have become common place in Texas. Physicians have not escaped this trend and are routinely expected to sign non competition agreements before accepting many positions in private practice. Non compete agreements in Texas must meet certain general requirements to be enforceable; however, additional requirements exist under the law to properly restrict competition from a departing doctor.
For a non compete to be valid in Texas, the covenant not to compete must be (1) ancillary to an otherwise enforceable agreement (2) be reasonable with respect to time, geographic area, and scope of activity and (3) not impose a greater restraint than is necessary to protect goodwill or other interests of the business. Tex. Bus. & Com. Code Ann. § 15.50 (West).
Ancillary to an Otherwise Enforceable Agreement
A covenant not to compete is ancillary to an otherwise enforceable agreement if the consideration given by the employer in the otherwise enforceable agreement gives rise to the employer's interest in restraining the employee from competing and the covenant enforces the employee's consideration or return promise in the otherwise enforceable agreement. Light v. Centel Cellular Co. of Texas, 883 S.W.2d 642, 647 (Tex. 1994), abrogated by Marsh USA Inc. v. Cook, 354 S.W.3d 764 (Tex. 2011), and holding modified by Alex Sheshunoff Mgmt. Servs., L.P. v. Johnson, 209 S.W.3d 644 (Tex. 2006).
To satisfy the first requirement of an otherwise enforceable agreement, a physician might receive specialized training for certain procedures or related to his or her specialty. Courts have held that specialized training is adequate consideration and worthy of protection by a business. See Neurodiagnostic Tex, L.L.C. v. Pierce, 506 S.W.3d 153, 165 (Tex. App. 2016).
Limitations on Geography, Scope, and Time
Non competition agreements must contain reasonable limitations of geography, scope of activity, and time. “A reasonable geographic scope is generally considered to be the territory in which the employee worked for the employer.” TransPerfect Translations, Inc., 594 F. Supp. 2d at 754 (citing Harthcock, 824 S.W.2d at 660); see also Cobb v. Caye Publ’g Grp., Inc., 322 S.W.3d 780, 783–84 (Tex. App.–Fort Worth 2010, no pet.) (“Generally, a reasonable area for purposes of a covenant not to compete is considered to be the territory in which the employee worked while in the employment of [her] employer.”). For example, a doctor that saw patients exclusively in the Houston area would not be restricted from entering new employment in Dallas, TX.
Scope of activity must also be restricted reasonably. Courts are much more likely to enforce a restriction of a narrow set of activities if a broad range of activities are available to an employee. For example, a doctor might be enjoined from performing a specific procedure; however, a court may find that prohibiting a doctor from performing a broad range of procedures unenforceable.
As to time, courts have generally found that between two to five years is a reasonable restriction for employees. See e.g. Gallagher Healthcare Ins. Servs. v. Vogelsang, 312 S.W.3d 640, 654 (Tex. App. 2009).
Special Requirements for Physician Non Competes
Specific rules are outlined in the Texas Business and Commerce Code concerning doctors. See below:
(b) A covenant not to compete relating to the practice of medicine is enforceable against a person licensed as a physician by the Texas Medical Board if such covenant complies with the following requirements:
(1) the covenant must:
(A) not deny the physician access to a list of his patients whom he had seen or treated within one year of termination of the contract or employment;
(B) provide access to medical records of the physician's patients upon authorization of the patient and any copies of medical records for a reasonable fee as established by the Texas Medical Board under Section 159.008, Occupations Code; and
(C) provide that any access to a list of patients or to patients' medical records after termination of the contract or employment shall not require such list or records to be provided in a format different than that by which such records are maintained except by mutual consent of the parties to the contract;
(2) the covenant must provide for a buy out of the covenant by the physician at a reasonable price or, at the option of either party, as determined by a mutually agreed upon arbitrator or, in the case of an inability to agree, an arbitrator of the court whose decision shall be binding on the parties; and
(3) the covenant must provide that the physician will not be prohibited from providing continuing care and treatment to a specific patient or patients during the course of an acute illness even after the contract or employment has been terminated.
(c) Subsection (b) does not apply to a physician's business ownership interest in a licensed hospital or licensed ambulatory surgical center.
Tex. Bus. & Com. Code Ann. § 15.50 (West)
The most significant of these additional requirements for doctors is subsection (b)(2) where a non competition agreement must provide for a buyout at a reasonable price to be enforceable. See Greenville Surgery Center, Ltd. v. Beebe, 320 S.W.3d 850, 853 (Tex. App.– Dallas 2010, no pet.).
Non compete law as applied to Texas physicians is a complex area of law. It is important to seek the advice of a competent non compete lawyer to determine enforceability or to litigate physician non competes.
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