Non-Compete legislation – New Mexico limits medical non-competes.

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:

1. It is not retroactive and only applies to agreements entered into after July 1, 2015;
2. If the agreement is already in place and is extended or renewed (after July 1) it is unenforceable;
3. 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;
4. Non-disclosures for confidential information/trade secrets are permitted;
5. Non-soliciation provisions for patients/employees for a one year period or less are permitted; and
6. 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.