March 25, 2019

March 25, 2019

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New Connecticut Statute Restricts Physician Non-Compete Agreements

The Connecticut General Assembly has passed a bill that establishes significant new restrictions on physician non-compete agreements in the state. The governor is expected to sign the bill (Senate Bill 351, as amended) soon.

Under SB 351, a physician covenant not to compete is valid and enforceable only if it is:

  1. necessary to protect a legitimate business interest;

  2. reasonably limited in time, geographic scope, and practice restrictions as needed to  protect that interest; and

  3. otherwise consistent with the law and public policy.

The statute also specifies that the party seeking to enforce a physician covenant not to compete bears the burden of proof at any proceeding. These factors and burden of proof are consistent with current Connecticut common law as to non-compete agreements in general. The remainder of the new statute is not.

For covenants not to compete that are entered into, amended, or renewed on or after July 1, 2016, the statute prohibits restricting a physician’s competitive activities (i) for longer than one year and (ii) beyond 15 miles from the primary site where the physician practices (i.e., the office, facility, or location from which a majority of the revenue from the physician’s services is generated).

Additionally, a covenant not to compete entered into, amended, or renewed on or after July 1, 2016, is not enforceable against a physician if (i) the employment agreement at issue was not made in anticipation of, or as part of, a partnership or ownership agreement and the agreement expires and is not renewed, unless, prior to the expiration, the employer makes a bona fide offer to renew the contract on the same or similar terms and conditions, or (ii) the employer terminates the employment or contractual relationship without cause.

The statute sets an additional restriction for covenants not to compete that are entered into, amended, or renewed on or after July 1, 2016, between physicians and (1) hospitals, health systems, or medical schools, or (2) medical foundations formed by any of these entities. It allows these covenants to restrict a physician’s right to practice only with another such entity or medical foundation.

Finally, SB 351 provides that if a covenant is rendered void and unenforceable under the statute, the remaining provisions of the contract remain in full force and effect, including provisions requiring the payment of damages for injuries suffered because of the contract’s termination.

Jackson Lewis P.C. © 2019

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Edward Richter, Jackson Lewis Law Firm, General Employment Litigation Attorney, Second and Sixth Circuit  Appellate Attorney
Principal

Edward M. Richters is a Principal in the Hartford, Connecticut, office of Jackson Lewis P.C. For over 30 years, he has focused his practice on employer defense and counseling, including jury and bench trials in state and federal court, labor arbitrations, proceedings before the Department of Labor, Connecticut Commission on Human Rights and Opportunities, and Workers’ Compensation Commission, as well as appellate work before the U.S. Courts of Appeal for the Second and Sixth Circuits.

In addition to his extensive background...

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Clifford R. Atlas, Employment Litigation Attorney, Jackson Lewis, non-solicitation agreements lawyer
Principal

Clifford Atlas is a Principal in the New York City, New York, office of Jackson Lewis P.C. He is the Co-Leader of the Non-Competes and Protection Against Unfair Competition Practice Group.

Mr. Atlas works extensively with clients in developing and drafting employment contracts and restrictive covenant agreements, and developing programs to best protect clients’ confidential business information. He has significant experience in prosecuting as well as defending actions involving breach of non-competition and non-solicitation agreements, employee raiding, misappropriation of confidential information, tortious interference with contract, unfair competition, and related business claims. Mr. Atlas also has assisted clients in employment issues arising from corporate transactions.

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Erik J. Winton, Jackson Lewis, Principal, Retaliation Lawyer, restrictive covenant drafting attorney
Principal

Erik J. Winton is a Principal in the Boston, Massachusetts, office of Jackson Lewis P.C. He is the Co-Leader of the firm's Non-Competes and Protection Against Unfair Competition practice group. His practice focuses on restrictive covenant drafting, counseling, litigation avoidance and litigation. He regularly provides valuable counsel to clients in New England and across the country regarding these issues.

Mr. Winton has extensive experience as a litigator, including successful first chair jury trial experience. He represents employers in...

617-367-0025