New Statute in Rhode Island
On July 12, 2016, the State of Rhode Island enacted General Law § 5-37-33, which rendered void any non-compete agreement between a physician and employer that limits “the right to practice medicine in any geographic area for any period of time after the termination of [a] partnership, employment, or professional relationship.”
This law also dictates that any employee or partnership agreement that prevents a physician from treating, advising, consulting, or soliciting a current patient of the employer is unenforceable as of the day the law took effect. The only explicit exception to the law is any non-compete covenant established in connection with the purchase or sale of a physician’s practice, though the restriction cannot exceed five years.
The statute states that it does not affect any provisions of an agreement that do not pertain to a non-compete covenant.
Update to Connecticut Law Alert
On June 2, 2016, the State of Connecticut enacted Senate Bill No. 351, which imposes specific restrictions on a non-compete covenant between physician and employer entered into, amended or renewed on or after July 1, 2016. The first part of the new law dictates that non-compete covenants are valid and enforceable only if they restrict a physician’s competitive activities for no more than one year and extend to a geographic location of no further than 15 miles from the physician’s primary site of practice.
The second part of the new statute specifies that non-compete covenants between physicians and employers are enforceable only if (1) they are made as part of a partnership or ownership agreement or as part of a contract that anticipates such an arrangement, or (2) the employment relationship is terminated by the employer for cause. However, non-compete covenants cannot be enforced against a physician in an agreement that does not contemplate ownership interest or when a physician is terminated without cause.
Conclusion
Employers should be aware of the implications of these laws and would be advised to thoroughly review of all of their existing physician non-compete agreements and consider modifications to those agreements to comply with the standards outlined above.
Massachusetts Undecided
Despite attempts by both the House and Senate of Massachusetts, the would-be Massachusetts Noncompetition Agreement Act did not pass before the close of the 2015-2016 legislative session on July 31, 2016.
The House and Senate versions of the Act differed slightly in the length of the restricted period an employer could bind an employee to refrain from competitive activities. The House’s version allowed a twelve-month period (absent certain exceptions), while the Senate’s version only allowed a three month period (absent the same exceptions). Additionally, the amount of required compensation over that period of time varied between the two versions as well: the House only mandated fifty percent of the former employee’s wage, and the Senate mandated at least one-hundred percent of the wage. While they disagreed on these differences, both chambers agreed that the restrictions must be reasonable in geographic reach and scope of proscribed activities, and would not be enforceable against minors and employees who were terminated without cause.
Since the two chambers could not reach an agreement by the end of the last session, the bill must be re-introduced for review by both chambers in January 2017 when the new session begins. For the time being, employers need not concern whether their employees’ non-competition agreements are subject to new restrictions under Massachusetts law.