Texas Physician Non-Compete Statute

What Rights Does the Texas Physician Non-Compete Statute Provide? 

Do you know your rights as a medical professional in Texas regarding your non-compete agreement?  The contract you sign when you first join the medical practice likely contains a non-compete clause with restrictive covenants.   Below we explain how to interpret a physician’s non-compete agreement.

At Gardner Employment Law, we have analyzed countless contracts to determine whether they follow the Texas Physician Non-Compete Statute. Contact us today if you need assistance with your physician non-compete agreement.

Understanding the Texas Physician Non-Compete Statute

Physician non-compete agreements, which are very common in the healthcare industry, aim to stop physicians from taking patients with them if they join a rival practice or start their own. According to ABC News, “Contracts with so-called restrictive covenants are now common in medicine.”  Texas law protects physicians who leave a medical practice from the following:

  1. Denying the physician access to a list of former patients he or she treated within a year of termination.
  2. Not including a buyout provision in the physician’s non-compete.
  3. Not allowing access to patients’ medical records after the patients have consented.
  4. Prohibiting the physician from continuing to provide treatment for any patient with an acute illness.

Consistent with the requirements for all Texas non-competes, a physician’s non-compete agreement must comply with of the requirements listed above, as well as the standard requirement of reasonableness.  The limitations upon the physician’s activities after leaving must be reasonable in

  1. Time or duration for the effect of the limitations.
  2. The geographical area where the limitations will apply.
  3. The scope of the physician’s activities from which he or she is prohibited from doing.

Last, the limitations upon the departing physician’s activities cannot be greater than are needed to protect the previous hospital or clinic’s legitimate business interests or goodwill.

As stated in Can Physicians Break a Non-Compete Agreement in Texas? — Here is the “Bottom line: If the non-compete agreement satisfies Section 15.50 of the Texas Business & Commerce Code, it is enforceable.”

Understanding Physician Non-Competes in Texas

Non-compete agreements exist to restrict the ability of physicians to leave and compete against the owner of the previous medical practice.  Some states have declined to include physicians in their statutory scheme of non-competition rules.  Texas does permit restrictions upon physicians but with added protections as compared to commercial non-competes.

The four special requirements listed above prioritize patient wellness and ensure that public health concerns are balanced against competitive business interests.  After all, patient care rises above the business needs of the two parties.  Medical professionals must understand the nuances of both the general and specific requirements of the Texas Physician Non-Compete Statute to apply the Texas statute to their career objectives.  The general requirements of reasonableness are found in subsection (a) of the statute, and the more specific protections for physicians are contained in subsection (b).

The Texas statute contains another general requirement for all non-competes in Texas.  A non-compete provision must “be ancillary to or part of an otherwise enforceable agreement at the time the agreement is made.”  In simpler words, Texas Law requires that all non-competes must be a part of another valid and enforceable legal agreement, such as an employment contract or a compensation agreement, or the non-compete itself can form a valid contract if all other contractual elements are present.

For years, this subject, “ancillary to or part of an otherwise enforceable agreement,” was hotly litigated.  This stems from the requirement that only confidential information (or training to use confidential information) can act as consideration or value to support the contract.  The Texas Supreme Court issued three key opinions which laid the controversy to rest, Sheshunoff in 2006 and Mann Frankfort Stein & Lipp Advisors in 2009, and later Marsh in 2011.  Now, if the employer promises to provide confidential information, which comes to pass sometime in the future, or the employee is required to handle matters that necessarily involve confidential information, or the physician or employee’s new business will harm the previous owner’s goodwill, valid consideration supports the formation of a binding contract.  However, the law in Texas still requires more than just money as consideration.  If the medical practice offers you money and nothing more to sign a non-compete, that will not create a valid contract.

In Texas, if a non-compete agreement fails to meet each and every element of these specific criteria, it cannot be legally enforced.  These criteria are listed above.  You may have signed a contract with a non-compete clause, but if one of the required elements has not been satisfied, the non-compete is not enforceable.

Physician Non-Compete Enforceability

In 2013, the Fourteenth Court of Appeals in Houston ruled on a case that illustrates how a non-compete agreement is not enforceable if it does not meet the requirements in the Texas Physician Non-Compete Statute.   In that case, LasikPlus of Texas, P.C., et al. v.Mattioli, Federico Mattioli, an ophthalmologist from Houston Texas, entered into an employment agreement in 2003 with LasikPlus to provide laser eye surgery and related services at the clinic. Nine years later Dr. Mattioli gave LasikPlus one month’s notice of his resignation from the clinic.

As his resignation date came closer, Dr. Mattioli notified LasikPlus that he would be opening his own private practice less than two miles away from the clinic. In response, LasikPlus filed a lawsuit against the doctor alleging, among other things, that Dr. Mattioli had “breached the covenant not to compete and the notice provision contained in the Employment Agreement.” Additionally, LasikPlus claimed that Dr. Mattioli would continue to reap the benefit of LasikPlus’ advertising  campaigns, whereas LasikPlus would be adversely affected if Mattioli was allowed to independently perform laser surgeries in the area because he would be taking some of LasikPlus’ patients.

Dr. Mattioli  argued that his non-compete agreement did not comply with the Texas Physician Non-Compete Statute because the contract failed to include a buy-out provision and was therefore not enforceable.  A physician’s opportunity to buy-out the non-compete restrictions is one of the requirements listed in subsection (b) of the statute.  Dr. Mattioli was correct.  Because LasikPlus had not specifically followed Section 15.50 of the Texas Business & Commerce Code, the Appellate Court ruled in Dr. Mattioli’s favor and concluded that the non-compete agreement was not enforceable..

Contact a Texas Physician Non-Compete Expert

Physician non-compete agreements many times are filled with complex and verbose legal jargon that may be hard to understand by even the smartest medical professionals. At Gardner Employment Law, we have years of experience ensuring doctors’ contracts satisfy Section 15.50 of the Texas Business & Commerce Code, the non-compete statute. If you need help understanding your physician non-compete agreement, contact us today.

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