Continuing my review of new employment-related bills is a measure that limits the use of non-compete agreements for doctors.
Anyone who tracks bills knows that the name on the bill sometimes doesn’t match the content. Senate Bill 351 entitled “AN ACT CONCERNING MATTERS AFFECTING PHYSICIANS AND HOSPITALS” is a good case in point.
Seems innocuous enough, right? But through various amendments and compromises, it actually contains specifics on what can or cannot be in a non-compete agreement for physicians. (For limits in other professions, see prior posts here and here.)
In general, the bill sets up a one year and 15 mile limit for physician non-compete agreements for any agreement after July 1, 2016.
The bill does not specify what is to happen to existing agreements that may have broader restrictions; will courts find that they violate the new ‘public policy’ of Connecticut, as the attorneys at the Working Together blog suggest? That remains to be seen.
For employers that have yet to draw up agreements, arguably there is a 60-day window to do so but given that this may now become law, it might be too little too late. (I have not heard whether the governor intends to veto this measure.)
For existing agreements, it appears that the review will attempt to mirror common law with three standards (note that the term “covenant not to compete” is actually defined as being applicable only to physicians). These standards are:
A covenant not to compete is valid and enforceable only if it is: (A) Necessary to protect a legitimate business interest; (B) reasonably limited in time, geographic scope and practice restrictions as necessary to protect such business interest; and (C) otherwise consistent with the law and public policy.
The bill goes on to state that:
A covenant not to compete that is entered into, amended, extended or renewed on or after July 1, 2016, shall not: (A) Restrict the physician’s competitive activities (i) for a period of more than one year, and (ii) in a geographic region of more than fifteen miles from the primary site where such physician practices;
Simple enough, right? Well, not exactly, the agreement also shall not:
(B) be enforceable against a physician if
(i) such employment contract or agreement was not made in anticipation of, or as part of, a partnership or ownership agreement and such contract or agreement expires and is not renewed, unless, prior to such expiration, the employer makes a bona fide offer to renew the contract on the same or similar terms and conditions, or
(ii) the employment or contractual relationship is terminated by the employer, unless such employment or contractual relationship is terminated for cause.
That’s a lot of “ands” and “unlesses” if you’re keeping track at home. But one thing I’m sure of is that a “for cause” termination allows for more flexibility.
But what is “for cause”? Can it be defined by the employer? Or is the legislature using another definition of “cause”? That, unfortunately, is a question for another day.
For now, physician groups, hospitals and other health care providers need to track signing of the measure and, if signed, review all existing agreements and form agreements for compliance with this new potential law. The one-year/15 mile restriction should become the norm.
And if you have a strong opinion against this measure, now would be a good time to lobby the governor to veto it.