Can I include a doctor noncompete in a separation agreement?
If you are a physician who owns or manages a medical practice in Texas, you may want to protect your business from losing patients, revenue and reputation to a former employee who decides to open a competing practice.
One way to do that is to include a noncompete clause in a separation agreement when you terminate another physician who is part of your practice.
Noncompete clauses
A noncompete clause is a contract provision that restricts an employee from working for a competitor or starting a similar business within a certain geographic area and period after leaving the employer. These agreements are controversial, and a number of states limit their application.
In Texas, noncompete clauses are generally enforceable if they meet certain requirements. However, there are some special rules and considerations that apply to physicians.
Physician noncompete clauses
According to the Texas Business and Commerce Code, a noncompete clause for physicians must be part of an otherwise enforceable agreement, such as an employment contract or a separation agreement. It must have a reasonable relationship to the employer’s interest in protecting its goodwill, confidential information, patient relationships or referral sources. Though, the noncompete can have reasonable limitations as to time, geographic area and scope of activity.
The departing doctor can keep their patients that they treated within the last year. You must provide access to medical records of the physician’s patients as consistent with medical ethics and state law. And, if the departing doctor is providing care for an acute illness, the noncompete cannot stop that treatment.
Reasonable limitations
What constitutes reasonable limitations depends on the facts and circumstances of each case, such as the nature and size of the practice, the location and population of the area and the specialty and skills of the physician. Generally, courts will look at whether the noncompete clause imposes a greater restraint than necessary to protect the employer’s legitimate business interests.
An example
As an example, a noncompete clause that prohibits a physician from practicing any type of medicine within 100 miles of the Arlington, Texas, employer for 10 years may be considered unreasonable and unenforceable.
On the other hand, a noncompete clause that prohibits a physician from practicing a specific specialty within 10 miles of the employer for one year may be considered reasonable and enforceable.