Though non-comepte legislation always seems to be in the news, signed legislation is rare. Last week, however, the governor of New Mexico signed a non-compete bill that limits post-employment covenants in the medical profession. Here is the New Mexico Medical Society’s take on the new law:
Governor Martinez signed SB325 which limits enforceability of contractual conditions involving certain healthcare practitioners who are under contract to health businesses. Declares a non-compete provision void, in a contract that restricts the right of a health care professional to provide health care services, upon the termination of the agreement (or extension) or the practitioner’s employment with a party seeking to enforce the agreement. Applies to agreements entered into on or after July 1, 2015.
Here is a link to the final bill that was signed. A few takeaways from the law:
- It is not retroactive and only applies to agreements entered into after July 1, 2015;
- If the agreement is already in place and is extended or renewed (after July 1) it is unenforceable;
- It does not restrict an employer from making an employee pay back certain expenses like a loan, relocation expenses, etc. if they have worked for less than three years;
- Non-disclosures for confidential information/trade secrets are permitted;
- Non-soliciation provisions for patients/employees for a one year period or less are permitted; and
- Liquidated damage provisions are permitted as long as they are not unreasonable.
The last provision is interesting. My guess is that a medical employer could tie liquidated damages to any violation of the non-solicitation provision which keeps a departing doctor from taking patients or employees for a year.
There is always a policy argument in favor of banning non-competes for doctors. It doesn’t seem like medical care should fall within these types of restrictions. But, states like Texas permit non-competes for MDs. Here, there has to be a buy out provision that the MD can pay to get out of the agreement. We’ll keep an eye out for any other post-employment covenant laws.