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Can Physicians Break a Non-Compete Agreement in Texas?

Are you a physician with a non-compete agreement? If so, there are special provisions in the Texas non-compete statute that you may not know.

At Gardner Employment Law, we analyze non-compete agreements and advise physicians of their rights. Read further if you want guidance about physicians’ non-compete agreements.

Regular Non-Compete vs. Physician Non-Compete Agreements 

Non-compete agreements restrict the ability to compete against a former employer. These agreements exist in almost every sector, including the medical field.  Generally, all covenants not to compete must follow the same basic requirements found in Section 15.50 of the Texas Business & Commerce Code.  Clients ask whether a non-compete will hold up in Texas.  If the wording satisfies the requirements in this statute, the answer is “yes.”

The provisions in Texas statute require that every non-compete agreement must: (1) “be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.” In addition,(2) the restrictions must be reasonable and not “impose a greater restraint than is necessary to protect the goodwill or other business interest of the promisee.”

In layman’s terms, this means that every non-compete agreement must:

  1. Be an enforceable contract or be part of another enforceable contract, such as an employment agreement; and
  2. Contain “reasonable” limitations on the scope of work, duration, and geographic area that are necessary to protect a company’s trade secrets and confidential business information.

Physicians’ non-compete agreements must satisfy additional requirements that other commercial non-competes do not. These requirements apply to persons who are licensed by the Texas medical board.

Requirements for a Physician Non-Compete Clause

According to the New York Times, “contracts with so-called restrictive covenants are now common in medicine, although some states limit their use.” Texas is one of those states. Based on Texas Law and requirements by the Texas medical board, a physician’s non-competition agreement must:

  • Contain a buyout provision: The physician must be able to buy out the agreement.
  • Provide access to medical records: The physician must be allowed access to patient medical records (with patient consent).
  • Provide access to a list of patients: Physicians must be given access to their list of patients that they have seen or treated within the previous year of the physician’s departure.
  • Allow for continuity of care: The non-compete agreement cannot prohibit the physician from continuing to treat patients with acute illnesses (even after the physician leaves).

Texas non-competes are in the minority.  Some states have banned physician non-competes entirely.  However, Texas is one of the few states that still permit non-compete agreements against physicians.

Clients frequently ask me how to break a non-compete.  The answers lies in determining whether the non-compete satisfies the elements of the Texas statute that I have listed.  Make a check list of those elements.  If your non-compete fails to meet one or more of the required elements, you may be able to break your non-compete in court.

If a Physician Cannot Find Another Position, Will Texas Courts Enforce the Non-Compete?

If the non-compete agreement prevents a physician from being able to be employed in his or her field of medicine where he or she lives, Texas courts will not enforce the agreement.  In American Surgical Assistants, Inc. v. Villareal, the cardiovascular surgeon lived in an area where there was little opportunity for a position in Dr. Villareal’s field, other than the one he took after leaving American Surgical Assistants.  Also, there were few trained assistants available in the area.  The Court of Appeals held that the non-compete agreement would hinder legitimate competition between businesses and the mobility of skilled employees and was therefore unenforceable.

If There is No Buy-Out, Is a Physician’s Non-Compete Enforceable?

The buy-out requirement provides physicians with the unique opportunity to buy out their covenants. This is not available to any other employee subject to a covenant.  If there is no buy-out clause, the non-compete is not enforceable, according to Texas courts.

Do Courts Consider the Public’s Need for Medical Services in Non-Compete Agreements?

Unlike other industries, in the medical field it is difficult for a physician to transition into other areas of medical practices. This is illustrated by the Villareal case.  Sections (b) of the Texas non-compete statute provides some protection so that physicians can continue to practice medicine and maintain doctor-patient relationships.

An unreasonably restrictive non-compete not only impacts doctor-patient relationships, but it can also impact the public at large. If that is the case, a court may find that the noncompete is unenforceable. For example, if a physician’s non-compete is too broad in geographic scope, a court may strike the non-compete. One city may have a particular need for healthcare providers, and that may be a factor.  Or a physician’s special area of practice may be important to a certain community. In these instances, courts may determine as a matter of public policy that the restriction is unreasonable or too broad.

There are multiple factors to consider when it comes to a physician non-compete. Physicians have a relationship with the public that other commercial businesses do not have. Plus, the need for medical care applies to everyone. There are legitimate reasons to meticulously examine your non-compete and protect your medical practice and patients. Do not hesitate to take those steps and find solutions.

Are Non-Compete Agreements Enforceable in Texas?

Bottom line: if the non-compete agreement satisfies Section 15.50 of the Texas Business & Commerce Code, it is enforceable.  Legal jargon can be inaccessible and hard to interpret. Do not feel like you have to navigate your physician non-compete alone.  Give us a call.

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