Our blog regularly monitors how noncompetes are under attack by federal regulatory bodies and state legislatures. Georgia’s legislature has largely stayed out of the fray. However, last week, Representative Newton of Augusta introduced legislation that would curtail the use of noncompetes for physicians.
Physician noncompetes under attack in Georgia?
House Bill 1490 provides that any partnership or employment agreement with a physician licensed to practice medicine that restricts the right of the physician to practice medicine in Georgia is void and unenforceable with respect to said restriction. The legislation identifies illustrative restrictions that would be void. These include noncompetes, patient non-solicits, and patient no-servicing provisions.
The legislation barring physician noncompetes also attempts to ensure the new law cannot be circumvented through choice of law and venue provisions in health care worker agreements. Indeed it provides that such choice of law and mandatory venue provisions in an agreement for clinical healthcare services to be rendered by a physician in Georgia are void, unenforceable and against public policy.
The restricted physician could “void” any provision violating the proposed law.
The legislation includes exceptions for covenants in connection with the sale or dissolution of a business.
The law would apply retroactively to all contracts entered into on or after January 1, 2011. That date may seem unusual. This was around when Georgia noncompete law changed to make it easier for employers, including medical practices, to enforce noncompetes. We suspect that is why this date was selected.
Notably, the Federal Trade Commission’s proposed ban on noncompete agreements likely would not apply to nonprofit hospitals. The Federal Trade Commission rule would preempt state law. But state legislatures could go further in restricting noncompetes than the proposed rule from the Federal Trade Commission. Because this proposed legislation would apply to noncompetes in physician contracts with nonprofit hospitals, Georgia law would reach some noncompetes that the Federal Trade Commission’s proposed rule could not. Of course, the Federal Trade Commission’s rule is likely to be subject to many legal challenges.
How do other states handle physician noncompetes?
The actual proposed Georgia bill can be viewed here. It remains to be seen whether this attempt to ban noncompetes for physicians will gain any traction. Some states do not allow physician noncompetes (for example, Alabama, Massachusetts, New Hampshire, and Rhode Island). Others have introduced legislation providing for a ban or limitations on physician noncompetes (for example, Florida and Ohio).
We will monitor the status of this legislation. Please continue to monitor our blog for updates on noncompete law developments in Georgia and across the country. If you have questions regarding your organization’s noncompetes and other restrictive covenants, please do not hesitate to reach out.
Neal Weinrich knows noncompetes and trade secrets inside and out. A shareholder at Berman Fink Van Horn, Neal counsels clients in all industries on matters involving restrictive covenants, trade secrets and other competition-related issues.
