Florida Legislature Restricts Medical Noncompete Agreements

Governor DeSantis recently signed an omnibus healthcare bill that, among other things, restricts physician noncompete agreements. The provision states that a specialist who practices in a county where one entity controls all physicians who practice that specialty is not bound by a noncompete because such noncompetes are not supported by a legitimate business interest. The legislature specifically found that “such covenants restrict patient access to physicians, increase costs, and are void and unenforceable under current law.” Furthermore, the provision states that such covenants remain unenforceable “for 3 years after the date on which a second entity that employs or contracts with, either directly or through related or affiliated entities, one or more physicians who practice such specialty begins offering such specialty services in that county.” Although this legislation was criticized because it was heavily lobbied by one group of physicians in Southwest Florida, supporters argue that it is consistent with sound public policy and existing law.

Noncompetes are analyzed for reasonable duration and geographic scope and also for a “legitimate business interest.” In other words, noncompetes that are designed to protect the training and investment of an employer are usually upheld while noncompetes that simply preclude competition or employment are prone to modification or nonenforcement. In learned professions, particularly those that provide critical services to the public (such as physicians), noncompetes are generally subject to more scrutiny than, for example, a noncompete applied to a medical device salesperson.

With regard to sales positions, an employee frequently is either assigned a group of customers or builds a group of customers using the employer’s time and resources. When that employee departs, the employer faces the loss of the goodwill that was built up by its investment. Similarly, certain technical professions involve either on-the-job training or employer-paid training or education. In these instances, current Florida law holds that an employer has a legitimate business interest in ensuring that a customer base or technical skills developed on its dime will not be used against the employer by a competitor for at least a certain period of time.

Although the new legislation explicitly applies only to a small subset of physician noncompetes (or, as its critics allege, a particular group in Southwest Florida), it has broader implications. Other physician noncompetes will continue to be analyzed under existing law and the legislature’s recognition that these noncompetes pose significant public policy issues will likely color litigation of medical noncompetes more broadly.