Are non-compete agreements with physicians enforceable in Texas?
Yes, if they are written correctly.
What are the requirements for non-competes to be enforceable against physicians in Texas?
Part of Another Agreement. Non-compete agreements must be ancillary to or part of another agreement. In the medical field, they are usually wrapped up into an employment agreement or a confidentiality agreement. Sometimes, non-compete restraints can also be a part of a severance agreement. Either way, a pure stand-alone non-compete agreement in Texas is not enforceable.
Must be Reasonable. Non-compete agreements must contain “reasonable” restrictions regarding the term, geographic area, and the scope of the activity restricted. The restraints should not be broader than what is necessary to protect the employer. For example, a medical practice that draws most of its patients from a 3-county radius, should not have a non-compete agreement that covers the entire state of Texas.
Must Have Consideration. Non-compete agreements must be supported by consideration, i.e., a physician should receive something in return for agreeing not to compete with his or her former medical practice. A bare promise not to compete is not going to be enforceable in court.
Additional Specific Requirements. In addition to the above requirements, physician non-competes must provide that:
(1) physician will not be denied access to a list of his patients whom he had seen or treated within one year of termination of the contract or employment;
(2) physician will have 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;
(3) 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;
(4) 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
(5) 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.
What is a Reasonable Buy Out Amount For a Physician Non-Compete?
Buy outs can range from $50,000 $1,000,000 or more. The amount depends on the size of the practice, the location of the practice, the physician’s salary, the revenue generated by the physician, the projected time and costs to find a replacement for the departing physician, whether a physician joining the practice already had an established patient base, and many other factors. Needless to say, this is a highly negotiable provision and should not be treated lightly.
Are Physician Non-Compete Agreements Usually Negotiable?
Yes. Unless a physician is dealing with a very large hospital system, the scope of non-compete agreement as well as the buyout amount are usually negotiable terms.
BOTTOM LINE: Physicians and medical practices should carefully consider the necessary scope of the non-compete restraints before they enter into an employment agreement. Otherwise, either of them can face an unpleasant surprise upon the termination of employment.
Leiza Dolghih is the founder of Dolghih Law Group PLLC. She is board certified in labor and employment law and has 16+ years of experience in commercial and employment litigation, including trade secrets and non-compete disputes. You can contact her directly at leiza@dlg-legal.com or (214) 531-2403.