Are Surgery Centers’ Non-Compete Agreements Valid in Texas?

In recent years, it has become quite common for surgeons to become part owners of free-standing ambulatory surgery centers in Texas. Often, their purchase of the ownership comes with the strings attached – a requirement that they perform a certain number of surgeries at that particular ACS and that they do not compete with the ACS within a certain geographic radius.

Earlier this year, a Texas surgeon challenged his non-compete with an ACS where he was a part owner after his ownership proved not to be as profitable as he had expected. The basis for his challenge was that the Texas Covenant Not to Compete statute requires physician non-compete agreements to contain a buy-out clause and his non-compete agreement did not contain such a clause.

However, a Texas Court of Appeals rejected his challenge and held that the Texas Covenants Not to Compete statute clearly states that a buy-out requirement “does not apply to a physician’s business ownership interest in a licensed hospital or licensed ambulatory surgical center.”

Obviously, surgery centers’ non-compete agreements still have to meet other requirements of the statute, such as, for example, they have to be reasonable and not be larger than necessary to protect a legitimate business interest.

CONCLUSION: In Texas, different rules apply to employment-related non-compete agreements and business-related non-competes. Moreover, physician non-competes are subject to their own set of rules, which are different for employment agreements and contracts related to physicians’ ownership of ambulatory surgery centers.

Leiza Dolghih is a partner at Lewis Brisbois Bisgaard & Smith LLP in Dallas, Texas and a Co-Chair of the firm’s Trade Secrets and Non-Compete Disputes national practice. Her practice includes commercial, intellectual property and employment litigation. You can contact her directly at Leiza.Dolghih@LewisBrisbois.com or (214) 722-7108.

Leave a Reply