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New Restrictions on Non-Compete Clauses: A Victory for Physicians


The State of Connecticut is likely this summer to add significant statutory restrictions to physician non-compete agreements. Specifically, the Connecticut General Assembly is sending Senate Bill 351, An Act Concerning Matters Affecting Physicians and Hospitals, to Governor Malloy, who will presumably soon sign it into law.

The bill has two main provisions. One defines specific restrictions on the geographic scope and duration of non-compete clauses in physician contracts; the other links the enforceability of non-compete clauses to the structure of the physician’s relationship with his employer and to the reasons for termination of that relationship. Together, these clauses limit non-compete restrictions going forward and might require employers to review of all existing physician non-compete agreements for conformity.

The first section of the bill proposes absolute caps on non-compete time-and-distance restrictions, specifically that (a) any time restriction cannot be longer than one year; and (b) any geographic restriction cannot be greater than 15 miles from the physical location of the physician’s practice. Although the bill applies only to agreements that take effect on or after July 1, 2016, it is not clear whether more-restrictive agreements signed before this date will continue to be valid.

The second part of the bill specifies that physician non-compete covenants will not be enforceable unless (a) they are made as part of, or in anticipation of, an ownership interest in the employer; or (b) the employer terminates the employment agreement without cause. Because some of this section’s terms are open to interpretation, it is likely that litigation will create a body of future court decisions that will clarify the new law, but terminations for cause will undoubtedly still help protect the enforceability of non-compete clauses.

Nonetheless, the net result of these and other sections within the law would be to limit employers’ ability to craft strong non-compete agreements, shifting some negotiating power to doctors. Employers should be aware of the implications of this law, and they would benefit from a complete review of all their existing physician non-compete agreements, including possibly modifying them to comply with the standards outlined above.