Florida Legislature Proposes Ban on Physician Noncompete Agreements
- In Florida, physician noncompete agreements are currently enforceable (if reasonable in scope and time), unless they restrict physicians who practice a particular specialty in a county where all of the physicians in that specialty are employed or contracted by a single entity.
- House Bill 11, if enacted in its current form, would make all physician noncompete agreements, existing and future, unenforceable without exception.
- Senate Bill 458, if enacted in its current form, would make all physician noncompete agreements entered into on or after July 1, 2024, unenforceable, unless: 1) the noncompete is related to research, 2) the physician is compensated at least $250,000 per year or 3) the noncompete is related to the sale of the equity, goodwill and assets of the physician's business.
The Florida Legislature is currently considering two bills that, if enacted in their current form, would significantly reduce (and potentially eliminate altogether) the enforceability of noncompete agreements against physicians in Florida.
Currently, Section 542.336 of the Florida Statutes (RC Statute) prohibits restrictive covenants only between physicians who practice a medical specialty and an entity that employs or contracts with all physicians who practice that same specialty within the same county. The RC Statute's effect on Florida's physician employment marketplace is limited, and most restrictive covenants, including noncompete agreements, are enforceable if they are 1) justified by a legitimate business interest and 2) reasonable in time, area and line of business.
This may soon change if Florida's Legislature passes either House Bill 11 or Senate Bill 458 in the 2024 Regular Legislative Session, which is scheduled to end on March 8, 2024.
Although broadly referred to as "[a]n act relating to invalid restrictive covenants in health care," both bills target only the enforceability of noncompete restrictions – i.e., limitations on where and when a physician can practice medicine following the termination of an employment agreement or other professional relationship. Other restrictive covenants, such as nonsolicitation and nondisparagement provisions, are not addressed in the proposed legislation.
House Bill 11, introduced on Aug. 21, 2023, by Reps. Joel Rudman, M.D. (R-District 3) and Alina Garcia (R-District 115), would amend the RC Statute to make all physician noncompete agreements "void and unenforceable" because they are without "legitimate business interest." In other words, if enacted in its current form, House Bill 11 would convert the RC Statute into a blanket and retroactive ban of noncompete agreements with physicians in Florida.
Senate Bill 458, introduced on Nov. 14, 2023, by Sen. Jason Brodeur (R-District 10), would preserve the existing prohibition of the RC Statute and amend the statute to add the same blanket prohibition as House Bill 11, but with three significant exceptions (summarized below). Notably, unlike House Bill 11, Senate Bill 458 is not retroactive and would apply only to noncompetes "entered into on or after July 1, 2024."
Senate Bill 458 explicitly exempts the following noncompete agreements from the blanket ban:
- noncompete agreements related to research conducted by a physician under terms of a contract or in furtherance of a partnership, employment or professional relationship, so long as the noncompete does not impair the continuing care of the patients involved in such research
- noncompete agreements with physicians whose individual compensation is $250,000 or more per year (with compensation defined to include all wages, bonuses and benefits for employed physicians or, alternatively, all business income for physician-owners), or
- noncompete agreements with physicians who have an ownership interest in a medical business, management services organization, practice or entity (of any kind) (collectively, a "Business") that sell a) the goodwill of such Business, b) any or all of the physician's ownership interest in such Business, or c) any or all of the assets of the Business together with the goodwill of the Business and contractually agree with the buyer to refrain from conducting a competing business within a reasonable geographic area
At the moment, House Bill 11 does not appear to have much traction. Senate Bill 458 is currently with the Senate Rules Committee following unanimous approvals by the Health Policy Committee on Jan. 30, 2024, and the Commerce and Tourism Committee on Feb. 6, 2024. The tentative effective date for both bills would be July 1, 2024.
Employers and healthcare investors should closely monitor the progress and development of each bill. These stakeholders may also want to consider the feasibility of implementing alternative protections in preparation for either bill's potential passage. Any such alternative would, of course, need to be analyzed for compliance with complex federal and state healthcare laws.
For more information or questions regarding the pending legislation, please contact the author or another member of Holland & Knight's Healthcare & Life Sciences Team.
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