Overview
The Florida Legislature has declined to pass laws further limiting or prohibiting enforcement of restrictive covenants against medical doctors and doctors of osteopathic medicine. Before the Legislature were two different proposals.
The first proposal, House Bill 11, would strictly prohibit enforcement of restrictive covenants, without exception. That bill remained under consideration by a House subcommittee when the legislative session ended.
The second proposal, Senate Bill 458, would have prohibited enforcement of restrictive covenants against physicians, with three broad exceptions: (1) certain restrictive covenants relating to research, (2) restrictive covenants for physicians earning $250,000 or more per year, and (3) restrictive covenants for physicians who sell all or part of their medical business, practice, management services, or entity of any kind. The bill died in the Senate Rules Committee.
With neither bill having passed, healthcare providers doing business in Florida must continue to abide by previously existing legislation and case law. Under the existing framework, courts generally enforce restrictive covenants against physicians, subject to certain limitations. For example, restrictive covenants must be reasonable in duration and geographic scope. Fla. Stat. § 542.335. The “reasonableness” requirement has generated a slew of legal opinions by judges across the state, which should be analyzed on a fact and context-specific basis.
Florida courts have long held that restrictive covenants may not be enforced in a way that interferes with patient choice. See, e.g., Southernmost Foot and Ankle Specialists, P.A. v. Torregrosa, 891 So. 2d 591, 595 (Fla. 3d DCA 2004). Consistent with this decades-old case law, in 2019, Florida enacted a law prohibiting the enforcement of restrictive covenants against physician-specialists in a county where the same entity employs or contracts with all specialists in that practice area. Fla. Stat. § 542.336.
Over the past decade, states across the country have overhauled their laws relating to physician restrictive covenants. Some of the new laws pose unique challenges in the context of healthcare mergers and acquisitions. Generally, the parties to transactions involving physician practices anticipate that the selling physicians will remain at the practice for a period of time and that the practice will continue to benefit from the physicians’ reputation and long-standing relationships. As such, these transactions have historically included non-competition and non-solicitation covenants to discourage physicians from leaving and opening a new practice in a nearby location, convenient for existing patients who may not otherwise follow a physician upon their departure, and impacting the value of the business they sold.
A licensed attorney can help navigate state-specific complexities in Florida and across the country.
