New Florida Law Affects The Enforcement Of Physician Non-Compete Agreements

In Florida, non-compete agreements are governed by Chapter 542, Florida Statutes, and are generally enforceable as long as the geographical and time restrictions are reasonable in scope. However, on June 25, Governor Ron DeSantis signed into law a new provision dramatically limiting the enforcement of such agreements against physicians who practice in rural counties and focus their practice on a medical specialty.

Non-Competes in the Medical Profession

Florida's public policy allows enforcement of non-compete agreements, which has had a significant impact on the medical profession. As physicians have become increasingly mobile, it has become commonplace for entities that hire physicians to include restrictive covenants in employment agreements as a tool to deter the physicians from leaving to open a competing medical practice within a geographic region for a set period of time. These covenants also surface in partnership agreements and contracts for the sale of medical practices.

Florida Statutes Section 542.335 governs non-compete agreements and sets forth several factors that determine enforceability of a non-compete. Normally, restrictive covenants are permitted to protect "legitimate business interests." In order for a restraint to be deemed lawful, employers must be able to demonstrate that the restrictive covenant is "reasonably necessary to protect the legitimate business interest." Physician employers typically satisfy this requirement rather easily by demonstrating their investment in physician salaries, a steady flow of patients, and access to office space, facilities, and equipment.

Florida statutes do not include any specific geographical limits. Rather, if a court finds a challenged non-compete provision to be "overbroad, overlong, or otherwise not reasonably necessary to protect the legitimate business interests," it can modify or "blue pencil" the agreement to cure the issues affecting enforceability. Florida appellate courts have routinely reduced geographical or time restrictions deemed to be overbroad. Courts can also deem a restrictive covenant unenforceable if public policy significantly outweighs the legitimate business interests in enforcing the non-compete language.

The New Law Affects Enforcement of Non-Compete Agreements for Physician Specialists

Effective July 1, Florida law now prohibits non-compete agreements between a physician and an entity that employs or contracts with, either directly or indirectly, all...