There have been a number of recent legislative developments that will impact physician noncompete agreements entered into in Connecticut. First, any physician noncompete agreement entered into on or after July 1, 2016, must comply with Public Act No. 16-95 (the Act), which was signed into law by Governor Dannel P. Malloy on June 2, 2016. In short, the Act prohibits noncompete agreements that restrict physicians from competing for a period longer than 1 year or provide for a geographical restriction of more than 15 miles from the primary site where the physician practices. In addition, the Act provides that noncompete agreements will be enforceable only when a physician resigns or is discharged for cause. In other words, if an employer terminates a physician’s employment without cause, the physician is free to ignore the noncompete provision in his or her employment agreement.
In addition to Public Act No. 16-95, the Defend Trade Secrets Act of 2016 (DTSA) was signed into law by President Barack Obama on May 11, 2016. Three key features of the DTSA include: (1) the creation of a federal private right of action for trade secret misappropriation; (2) a provision permitting ex parte civil seizure of property necessary to prevent the propagation or dissemination of trade secrets; and (3) a requirement that employers provide notice to employees of their immunities under the DTSA for making confidential disclosures to the government, in court filings, or in connection with whistleblower retaliation claims against their employers. It will be important to include the DTSA’s whistleblower immunity notice requirements into new and existing employment agreements because, absent compliance with the DTSA’s notice requirements, employers will be unable to recover exemplary damages and attorneys’ fees in connection with civil actions claiming violations of the DTSA.
Given the recent state and federal legislative developments, now is a good time for Connecticut employers to review and update their physician noncompete agreements to ensure compliance with the new Connecticut law and the DTSA’s whistleblower immunity notice requirements. While the Act specifically addresses physician noncompete agreements entered into on or after July 1, 2016, it may also be a good idea to consider updating physician noncompete agreements entered into prior to July 1, 2016, to avoid challenges claiming that these noncompete agreements violate Connecticut’s public policy, which is now set forth in the Act.