Connecticut Superior Court Ruling Addresses 2016 Physician Non-Compete Law
Connecticut’s Superior Court Stamford recently ruled to modify four physician non-compete agreements into compliance with Connecticut’s physician non-compete statute (Conn. Gen. Stat. § 20-14p), which limits certain covenants not to complete involving physicians to one year after employment and in a 15-mile geographic radius from the physician’s primary practice site, among other restrictions. Importantly, the Connecticut non-compete statute applies to non-competes that are “entered into, amended, extended or renewed on or after July 1, 2016.”
The case, Stamford Health Medical Group v. Alleva, involved Stamford Health Medical Group’s (SHMG) 2012 acquisition of a four-physician practice. In connection with the acquisition, SHMG employed the four physicians pursuant to separate employment agreements. Each employment agreement contained a non-compete provision that prohibited the physicians from competing with SHMG in certain geographic service areas for a period of two years after their respective employment with SHMG terminated.
In July of 2018, each of the four physicians notified SHMG of their intent to terminate their employment agreements and of their position that the non-compete provisions in their agreements were no longer applicable. Following receipt of the letters, SHMG applied for a temporary injunction to enforce the non-compete in each physician’s employment agreement. At the hearing, the four physicians argued that the non-compete provisions in their employment agreements did not comply with Connecticut’s statute because they exceeded the one-year time frame and geographic radius, and that each physician did not separately sign the non-compete (also a requirement of the statute). On the other hand, SHMG contended that the statute has no retroactive effect on the agreements, and relied on a ruling of the Connecticut Superior Court, Hartford County in Jefferson Radiology, P.C. v. Baldwin, which held that Section 20-14p does not apply retroactively. Without providing its reasoning, the court ruled that Section 20-14p does in fact apply to the non-complete provisions in question. Accordingly, the court modified the non-competes such that SHMG is entitled to enforce the restriction for a period of one year and within a 15-mile radius of the physicians’ primary practice site.
The court made this ruling despite the fact that Section 20-14p is applicable to non-competes entered into, amended, extended or renewed after July 1, 2016, and that the non-compete agreements in this case were entered into in 2012. However, the court makes reference to a 2018 renewal of the physician employment agreements, though it never directly addresses or discusses this renewal. It is therefore likely that the court’s ruling was based on a 2018 renewal of the employment agreements, aligning with the plain text of the statute. The court also reformed the non-compete to comply with the statute, as opposed to rendering the entire non-compete void and unenforceable; the statute is silent on whether a non-compete may be reformed in such a manner. The court’s ruling provides insight into judicial interpretation of Section 20-14p.
As Section 20-14p is a relatively new statute, there is scarce case law interpreting its provisions. We will continue to monitor cases involving this statute and post updates on new developments.