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Are Physician Non-Compete Covenants Enforceable?
Although non-compete agreements with physicians have been held by courts to be enforceable, there is no per se rule that all such agreements involving physicians are enforceable. Courts “must still scrutinize whether the covenant, on the facts presented, is being legitimately employed to protect [the employer’s] legitimate interests, would not be harmful to the public, and would not be unduly burdensome to the defendant.” Oak Orchard Community Health Center v. Blasco, 8 Misc. 3d 927, 931 (Sup. Ct. Monroe County 2005) (citing BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 391 (1999)). In Oak Orchard, the Court declined to enforce the restrictive covenant in a pediatrician’s employment contract. Last month, another Monroe County Supreme Court justice denied the request for an injunction seeking to enforce a non-compete covenant contained in an anesthesiologist’s agreement.
Generally speaking, restrictive covenants in employment agreements will be enforced only if they are:
- Reasonable in time and area;
- Necessary to protect the employer’s legitimate interests;
- Not harmful to the general public; and
- Not unreasonably burdensome to the employee.
Employees challenging restrictive covenants in their employment agreements often focus on the employer’s claimed legitimate interest. In determining whether a restrictive covenant is necessary to protect the employer’s legitimate interests, the Court of Appeals has “limited the cognizable employer interests…to  the protection against misappropriation of the employer’s trade secrets or of confidential customer lists, or  protection from competition by a former employee whose services are unique or extraordinary.” BDO Seidman v. Hirshberg, 93 N.Y.2d 382, 389 (1999).
In Westside Anesthesia Associates of Rochester, LLP v. Anesthesia Associates of Rochester, P.C. (Sup. Ct. Monroe County 2019 [Index No. E2019007444]), the Court denied plaintiff’s request for a preliminary injunction enforcing the restrictive covenant against two anesthesiologists and their new employer “because [plaintiff] has failed to set forth sufficient indicia that the non-competes are necessary to forestall unfair competition.” Id. at 9. “It is well-settled that an employer has no legitimate interest in stifling legitimate competition.” Id.
The Court found that there was no evidence that the defendant doctors were in possession of trade secrets worthy of protection, or that they otherwise accessed or sought to use their former employer’s alleged confidential information for the benefit of their new employer.
The Court also determined that there was no showing that the defendant doctors were “unique or extraordinary.” Plaintiff made no showing that either of the defendant doctors possessed skills that gave them an unfair advantage over their former employer, and the Court also noted that the practices of the defendant doctors were not portable:
An anesthesiologist provides anesthesia to a patient and a surgeon performs a surgical procedure at the same facility; in this scenario, the anesthesiologist does not develop a relationship with the patient. [Id.]
The Court concluded that the plaintiff “wholly failed to demonstrate a legitimate business interest” and therefore “the application for a preliminary injunction must fail because a likelihood of success on the merits [was] not shown.” Id. at 10.
Although every case must be analyzed under its own set of facts, this is an interesting development that may impact the hospitals and practice groups in Monroe County that include broad, sweeping restrictive covenants in their physician employment contracts. Under another set of facts, the covenant in this case may have been enforced. If you would like to schedule a consultation to talk about restrictive covenants in employment, please feel free to contact me at firstname.lastname@example.org or (585) 512-3542.
Links to other articles I have written about non-compete agreements and related restrictive covenants are included below:
- New York Employers Could Soon Have More Difficulty Enforcing Restrictive Covenants
- Court of Appeals: Florida Choice-of-Law in Non-Solicitation Agreement is Unenforceable
My employment practice includes the representation of businesses and individuals in matters involving restrictive covenants, non-compete agreements, discrimination and failure to pay wages in State and Federal Courts, and before administrative agencies, including the New York State Division of Human Rights and the United States Equal Employment Opportunity Commission.
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