Enforceability of Physician Non-Compete Agreements

I have previously written about the enforceability of non-compete agreements with respect to health care professionals. Non-compete agreements for these professionals implicate certain public policy concerns absent in other industries. Non-compete agreements for physicians and other health care providers pose the unique issue of balancing the interests of patients against a physician’s ability to practice medicine.

In a recent case, Amsurg New Port Richey FL, Inc. v. Vangara, No. 2D14-2117, 2015 WL 894322 (Fla. Dist. Ct. App., Mar. 4, 2015), a Florida appellate court examined Tennessee law with respect to the enforceability of a physician non-compete agreement. In this case, Dr. Vangara entered into a joint venture agreement with AmSurg to own and operate a ambulatory surgery center. As part of the agreement, Dr. Vangara agreed to not have any ownership or financial interest in any other ambulatory surgery center or competing business. The agreement was governed by Tennessee law. AmSurg later learned that Dr. Vangara began operating his own competing ambulatory surgery business. Dr. Vangara refused to cease operating the business, and AmSurg sued in Florida state court to enforce the noncompete agreement.

The Florida trial court, relying on the Tennessee Supreme Court opinion in Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005), found that the joint venture noncompete provision was unenforceable. In Udom, the Tennessee Supreme Court invalidated restrictive covenants that prevent a physician from practicing medicine. The Udom Court reasoned that non-competition agreements were contrary to public policy because they may operate to interfere with the patient-physician relationship. The Florida appellate court found that the trial court erred in applying Udom and reversed the trial court. The appellate court concluded that the noncompete provision did not prevent Dr. Vangara from practicing medicine. Rather, it only prevented him from “having a financial interest in, managing, leasing, or developing a competing business”, all of which a company may lawfully restrict, even against a physician, under Tennessee law.

This case draws an important distinction between a noncompete that prohibits a physician from practicing medicine and a noncompete that prohibits a physician from owning a directly competitive business.

Do you have questions or concerns regarding a health care employment or non-compete agreement? Please contact the Thompson Burton team, who is regularly called upon to prepare, review, negotiate, and litigate non-compete agreements on behalf of businesses, health care providers and physicians.