Recently, the Tyler Court of Appeals invalidated a non-compete agreement among cardiologists in Nacogdoches, Texas. A breakdown of the opinion can be found here by Jonathan Pollard in his non-compete blog. His sum up of the ruling:
In what may stand as an opinion for the ages, the Texas Court of Appeals affirmed the trial court’s ruling, holding that the non-compete agreement was over broad, contrary to the public interest and therefore unenforceable. First, the agreement prohibited [one doctor] from practicing medicine of any sort – not just cardiology – within ten miles of the city limit. The appellate court found that such a restriction was over broad in scope and was greater than necessary to protect NHC’s legitimate interests. Second, and more significantly, the court held that the public interest in physician choice and access to medical care trumped the freedom of contract.
Physician related non-compete agreements are legal in the State of Texas assuming they satisfy the Texas non-compete statute which includes a buyout provision. Here, the court focused on the ramifications of enforcing such a non-compete agreement on the Nacogdoches community. As it is a smaller area, there are a lot less cardiologists and the court determined that public health considerations outweighed enforcing the non-compete.
This is particularly troubling if you have complied with the statute and then a court comes in and invalidates the agreement for essentially a public interest exception. Should Courts consider whether the public has easy access to a cosmetic surgeon or cosmetic dentist? What about non-health related services? The exception could go a long way.
That said, I doubt Texas courts would go that far. Deciding not to enforce a cardiologist’s agreement in a small town is quite different than a cosmetic surgeon’s agreement. Employers entering into non-compete agreements might also consider these types of issues and whether the enforcement of the non-compete agreement would have some adverse effect upon the public at large. Clearly the medical realm is an easy example of this though there might be others.