I’ve written before about the unique requirements that must be included in a noncompetition agreement with a Texas physician. The increasing likelihood that a Texas court will enforce a noncompetition agreement against any departing employee increases the importance that physicians and practice groups take great care in negotiating and drafting agreements with proper limitations as to time, geographic, scope limitations that are reasonable. While no blog post is an adequate substitute for capable legal representation, this two part series is intended to outline some of the relevant issues that Texas practice groups and the physicians employ should consider before they sign an agreement restricting the doctor’s post-employment practice.
The Texas statute requires that physician noncompetition provisions be reasonably limited in time, geographic scope and scope of activity to be restrained that are legitimate and necessary to protect the employer’s legitimate business interests and goodwill. Interests typically worthy of protection in medical practices usually include the employer’s confidential information, goodwill and referral sources.
Determining the proper geographic scope of the restrictions can be done by looking as historical data from where the patients reside or the location where the referral sources are located (i.e., the doctors referring the patients to the practice group) that represent a significant amount of the practice group’s revenue. Other options include whether the geographic scope is measured from the referring doctor’s office or the practice group where the physician signing the noncompetition agreement will practice. The importance of this designation will likely depend on whether the employer’s legitimate interests are in protecting its existing patient population or the referral sources from which it derives its new patients.
The proper temporal scope should be that amount of time it takes to recruit, hire and introduce to the referral community to the replacement physician. Some practice groups choose a year or two limitation while others choose the amount of time it took to recruit and hire the physician that is being hired and asked to sign a noncompete with some additional time added to account for the time it takes to introduce the new doctor to the medical community and referral sources. The more highly specialized practice (and conversely fewer number of qualified physician replacements) may justify a longer temporal scope of restriction. Conversely, practice areas that are less specialized or where there are an abundant number of replacement physicians eligible for hire, may only support a shorter noncompetition period.
In the next post, I’ll discuss the buy-out feature that Texas law requires to be included in every physician noncompete and that allows the physician to buy his or her way out of the noncompetition agreement.
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