Physician Non-Compete Agreements - Are They Enforceable in Louisiana?
Non-compete agreements prohibit an individual from competing in a designated geographical area for a specified duration of time, and in today’s competitive marketplace, their use is increasing. This is certainly true in Louisiana. Are such agreements, however, enforceable against Louisiana physicians, considering their increasingly specialized practices? As of today, the answer appears to be yes, if drafted correctly.
Louisiana Revised Statutes 23:921 and its judicial interpretations strictly control the enforceability of non-compete agreements in Louisiana. This single statutory provision governs the enforcement of these agreements against any individual in any profession, trade or business, including the medical profession. La. R.S. 23:921(A)(1) begins with a general prohibition against any agreement whereby anyone is restrained from exercising a lawful profession, trade or business, unless one of the listed exceptions to the general prohibition contained therein is satisfied. It provides:
Every contract or agreement, or provision thereof, by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, except as provided in this Section, shall be null and void.
The statute then lists eight exceptions to this general prohibition. These exceptions are generally based upon relationships, including the employer/employee relationship, the sale of goodwill of a business, the dissolution of a partnership, the franchisor/franchisee relationship, the employer/computer employee relationship, the corporation/shareholder relationship, the partner/partnership relationship and the limited liability company/member relationship.
The Employer/Employee relationship is the most common exception to the general prohibition, and it is listed in 23:921(c). It provides in pertinent part:
Any person, including a corporation and individual shareholders of such corporation, who is employed as an agent, servant or employee may agree with his employer to refrain from carrying on or engaging in a business similar to that of the employer and/or from soliciting customers of the employer within a specified parish or parishes, municipality or municipalities, or parts thereof, so long as the employer carries on a like business therein, not to exceed a period of two years from termination of employment…
To fall within the “safe haven” of all listed exceptions to the general prohibition, most Louisiana courts require a valid non-compete agreement to contain an area of prohibition listed by parishes, municipalities or parts thereof, together with a term of no longer than two years from the date of termination of the relationship. These requirements are derived directly from La. R.S. 23:921.
While not expressly required by the statute, some Louisiana courts also require that a valid non-compete agreement narrowly and accurately define the business in which the individual is prohibited from competing.1 Other Louisiana courts deny the need for this additional non-statutory-based requirement.2 However, if the business is defined within the agreement, the definition must be narrow and accurate.3
If a particular agreement meets all of the statutory requirements, can it be used to stop a physician from competing in a particular geographical area? Can public policy concerns over patients’ freedom of choice to obtain treatment from a certain physician be used to invalidate physician non-compete agreements? Not according to Louisiana case law.
In Regional Urology, L.L.C. v. Price, 966 So.2d 1087 (La. App. 2 Cir. 2007), a group practice sought to enforce a non-compete agreement against a physician, who in turn alleged that public policy should invalidate the agreement. The physician argued that enforcement of the agreement would limit the freedom of patients to choose their treating physician. The Second Circuit Court of Appeals in Shreveport, however, discounted this argument and enforced the agreement against the physician. In doing so, the Court provided:
Lastly, Dr. Price argues that we should nullify the non-competition and non-solicitation agreement between the Members of Regional Urology for being against public policy. This we decline to do. The considerations raised by Dr. Price are compelling, particularly concerning the freedom patients should have to obtain treatment from a physician of their own choosing. However, these considerations were apparent when Dr. Price and the other physicians of Regional Urology signed the Amendment and put their own material concerns above that of patient choice. We find nothing in Louisiana’s public policy that would require us to nullify the agreement at issue. The policy concerns raised by Dr. Price are, as observed by the trial court, a matter for the legislature to address.
In fact, the Louisiana Legislature has authority to specifically prohibit the enforceability of non-compete agreements against certain professionals pursuant to La. R.S. 23:921. Moreover, because of the personal nature of physician services provided to the public, the legislature could prohibit the enforceability of non-compete agreements in Louisiana against physicians. The Regional Urology court recognized this and the additional fact that the Legislature has not excluded physicians from the enforceability of these agreements.
That is not to say, however, that the Legislature is above excluding certain professions from the enforceability of non-compete agreements in Louisiana. Indeed, although non-compete agreements can be enforced against physicians and individuals in many other professions and occupations, the Legislature has acted to exclude a single profession in Louisiana from the enforceability of these agreements: automobile salesmen!
Under Louisiana law today, a properly drafted non-compete agreement meeting all the requirements of La. R.S. 23:921 can be enforced against a physician. In the future, however, it remains within the province of the Louisiana Legislature to exclude physicians from being subect to the enforcement of these agreements if it chooses to do so.
1 Lafourche Speech &Language Services, Inc. v. Juckett, 94-1809 (La. App. 1 Cir. 3/3/95), 652 So.2d 679, writ denied, 95-0850 (La. App. 1 Cir. 5/12/95), 654 So.2d 351.
2 Baton Rouge Computer Sales, Inc. v. Miller-Conrad, 99-1200 (La. App. 1 Cir. 5/23/2000), 767 So.2d 763; Vartech Systems, Inc. v. Hayden, 05-2499 (La. App. 1 Cir. 12/20/06), 951 So.2d 247; Henderson Implement Company, Inc. v. Langley, 97-1197 (La. App. 3 cir. 2/4/98), 707 So.2d 482; Moores Pump and Supply, Inc. v. Laneaux, 98-1049 (La. App. 3 Cir. 2/3/99), 727 So.2d 695.
3 Vartech Systems, Inc. v. Hayden, supra.
Mr. Bursavich is a partner in the Baton Rouge office of Breazeale, Sachse & Wilson, L.L.P.