• Historically, non-compete agreements have been enforceable against physicians as long as the agreements were supported by a legitimate business interest and reasonably limited in geographical scope and time.
  • Gov. Ron DeSantis, however, recently signed into law a new section of Chapter 542, Florida Statutes, that prohibits restrictive covenant agreements, and voids existing restrictive covenant agreements, for physicians who practice a "medical specialty" in a county where all physicians in that medical specialty are employed by the same entity or its affiliates.
  • Employers who, through one entity or its affiliates, employ all of the physicians practicing a medical specialty in one county, will be impacted by the enactment of this new law.

Florida restrictive covenant agreements, whether standalone, contained in an employment agreement or as part of a medical practice purchase and sale agreement, are governed by Chapter 542, Florida Statutes. Historically, non-compete agreements have been enforceable against physicians as long as the agreements were supported by a legitimate business interest and reasonably limited in geographical scope and time. Gov. Ron DeSantis, however, recently signed into law a new section of the statute that prohibits restrictive covenant agreements, and voids existing restrictive covenant agreements, for physicians who practice a "medical specialty" in a county where all physicians in that medical specialty are employed by the same entity or its affiliates.

Effective June 25, 2019, newly enacted Florida Statutes Section 542.336 prohibits a restrictive covenant agreement between a physician who practices a medical specialty, and an entity that employs or contracts with, either directly or through an affiliated entity, all physicians who practice the specialty within the same county. The law voids any existing physician non-compete agreements that meet this criteria. The new law also provides that the restrictive covenant shall remain void and unenforceable for a three-year period following the entry of a second employer to the market that, either directly or through related or affiliated entities, employs one or more physicians who practice the same medical specialty. The statute expressly states that such restrictive covenants are void and unenforceable because the agreements are not supported by a legitimate business interest and do not benefit patients, as they restrict access to physicians and increase the cost of healthcare. The law was upheld by the U.S. District Court for the Northern District of Florida. See 21st Century Oncology, Inc. v. Moody, No. 4:19-cv-00298-MW-CAS, 2019 WL 3948099 (N.D. Fla. Aug. 21, 2019).

The employer who challenged Section 542.336 after its enactment employed all nine of the radiation oncologists in Lee County, Florida. The court upheld the statute, which voided physician non-compete agreements contained in their employment agreements, stating that it is "well settled that access to affordable healthcare is a legitimate state interest" and that the "concentration and consolidation of physician services" has the potential to "both increase prices and raise problematic barriers to patients' access to treatment." The court expressly stated that the new law does not apply to family practice physicians.

Employers who, through one entity or its affiliates, employ all of the physicians practicing a medical specialty in one county, will be impacted by the enactment of this new law. As a result, companies buying or investing in a medical practice must determine whether the medical practice is the sole employer of physicians practicing that medical specialty in the county. If it is, Florida's new statute may impact the value of such purchase or investment as those physicians can no longer be subject to non-compete agreements. Healthcare investors should consider alternatives to typical non-compete agreements, such as the forfeiture of equity or deferred compensation arrangements, if a physician leaves the practice within a certain period of time and without good reason following the closing of an investment in or the sale of the practice. Any such alternatives would also need to be analyzed for compliance with complex federal and state healthcare laws.

For more information and questions on the potential impact of the new statute, contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem. Moreover, the laws of each jurisdiction are different and are constantly changing. If you have specific questions regarding a particular fact situation, we urge you to consult competent legal counsel.