Texas Non-Compete

Can Physicians Break a Non-Compete Agreement in Texas?

Are you wondering how to break a non-compete agreement that is preventing you from moving your medical practice to another clinic?  Hospitals and associations often use non-compete agreements and may bury them deep in complex legal documents.

Read on to learn how to determine whether your non-compete is enforceable or whether you can buy out your non-compete.

What is a Physician Non-Compete Agreement?

A non-compete agreement is a provision within a contract that bars physicians from practicing their area of specialization within a certain distance from the hospital, clinic, or association that they are leaving. As we explained in “Primer on Physician Non-Competes,” the hospital or association that holds the non-compete is entitled to protect its proprietary information and goodwill created over time with patients. However, for physicians, these agreements can pose challenges and limitations on their professional mobility. 

Are Physician Non-Competes Legal in Texas?

Yes.  Section 15.50 of the Texas Business & Commerce Code permits non-competes against physicians.  Known for its pro-business environment, Texas generally upholds the enforceability of non-compete agreements against physicians, provided the non-compete meets certain criteria. To be valid, a physician non-compete agreement in Texas must:

  1. Be ancillary to an enforceable agreement, such as a physician’s compensation contract
  2. Define a reasonable scope of activity, geographic area, and duration
  3. Protect a legitimate business interest of the employer, such as trade secrets or patient relationships.
  4. Contain a buyout provision for a reasonable price.

Beyond these basic requirements, there are additional arguments that could influence the judge in ruling on the enforceability of a physician non-compete:

  1. Balance of interests:  Texas courts balance the health providers’ interests with the rights of patients. Courts may scrutinize non-compete agreements to ensure they do not unduly restrict a physician’s ability to practice medicine or prevent patients from accessing the medical treatment needed.
  2. Public Policy Considerations: Non-compete agreements that excessively restrict a physician’s ability to practice or hinder their professional mobility may face greater scrutiny from courts. Hospitals must show a clear and justifiable business rationale for imposing restrictions on physicians, such as protecting patient relationships or proprietary medical practices.
  3. Industry-Specific Factors: For physicians, where access to specialized skills and knowledge is crucial, courts may be more nuanced in deciding how they choose to enforce a non-compete. Physicians may argue that the restrictions imposed unduly interfere with patient access to services or impede delivery of essential medical care. 
  4. Emerging Legal Precedents: Recent court decisions and legislative developments may influence the enforceability of physician non-compete agreements, showing the importance of staying up-to-date on legal trends in the healthcare field and consulting with knowledgeable legal counsel.

If a physician non-compete agreement meets all of the criteria listed, it stands a good chance of being enforced against a physician if challenged. However, if the language is overly restrictive on a physician’s practice or mobility or not in line with the Texas’ legal requirements, a court may choose to modify or even invalidate the non-compete altogether. You should thoroughly review all contracts before signing on the dotted line, keeping a careful eye for non-compete clauses that may be buried within, and to obtain legal advice to ensure your rights are protected. 

How Can Physicians Avoid Becoming Trapped by a Non-Compete?

The first rule is to be proactive.  As mentioned, you should seek legal counsel before signing a non-compete.  As you learned in school, many times “you don’t know what you don’t know.”  An experienced attorney can interpret the legalese to help you negotiate the terms, understand your rights and obligations, and develop a strategic plan for future decisions should you want to move to another institution or medical group. 

One of the key terms used in the Texas Physicians Non-Compete Statute is the word “reasonable.”  The geographic limitation in the non-compete must be reasonable.  The restrictions on your activities, what you are prohibited from doing, must be reasonable.  The amount of time that the non-compete lasts must be reasonable.  And, the amount of the buyout must be reasonable.  If any one of these elements extends far beyond what an ordinary person in your position would expect, the non-compete may not be enforceable.

Next, if you find yourself trapped by onerous non-compete restrictions, consider buying out the non-compete altogether.  The Texas Physician Non-Compete Statute requires the hospital or clinic to include a provision in your contract for a buyout of the non-compete for a reasonable price.  The law states that if the non-compete agreement contains no buyout provision, the non-compete is unenforceable.  You can read more about this topic in our article, “What Makes a Physician’s Non-Compete Buyout Reasonable.”

What Are the Consequences of Non-Compete Violations?

Violating a non-compete agreement can have serious repercussions for physicians, including legal action from former hospitals or medical clinics. Remedies sought by hospitals may include:

  • Injunctive Relief: Courts may issue injunctions prohibiting the physician from engaging in competitive activities.
  • Monetary Damages: Hospitals may seek financial compensation for losses incurred due to the violation, such as lost profits or loss of patients. 
  • Liquidated Damages: Some agreements stipulate predetermined monetary penalties for breaches, known as liquidated damages.
  • Attorney Fees and Court Costs: The unsuccessful party in litigation may be responsible for covering legal fees and court expenses.

For physicians dealing with non-compete agreements in Texas, taking proactive measures is crucial to safeguard their interests while fulfilling contractual obligations. Given that hospitals and medical clinics generally have dedicated legal teams for creating and enforcing non-compete agreements, physicians must exercise caution.

Contact a Physician Non-Compete Expert

While non-compete agreements are a common feature of the Texas healthcare landscape, physicians have options for protecting their professional autonomy and mobility. If you need assistance understanding your physician non-compete agreement, contact us today. 

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