Physician Non-Compete Agreements - Update 5/24/2026

Physician non-compete agreements, also known as restrictive covenants or non-compete clauses, are contractual agreements that restrict physicians from practicing medicine in a specific geographic area for a certain period of time after leaving their current employment or partnership.

Non-Compete agrements hurt physicians and are usually unnecessary to genuinely protect a medical practice. New FTC regulation(s) may help.

Remember that there are individual restrictions and then there are corporate restrictions. There are also restrictions that address certain medical techniques, marketing plans and other aspects of a partnership relationship. The distinctions are important. The FTC is likely to protect individual rights but not necessarily corporate rights. The “corporate rights” are often interwoven with the individual doctor’s ability to practice so it can be a distinction without a difference that makes a big difference.

The worst case scenario is that a physician is fired without cause from a practice and realizes that the contract forbids him/her from practicing within 50 miles of the current practice. The provision may be unenforceable and the firing may be unlawful but no existing practice will take the chance to hire a physician with such legal baggage. We had a recent case of this type. The physician was forced to set up his own practice. We won the case and obtained significant damages but it was a painful decision that the physician faced. Either move his family to an area outside the non-compete or take the risk (and financial investment) of starting his own practice knowing that a loss in the litigation could crush that new venture.

The pendulum may soon swing bit in favor of the individual physician. On January 5, 2023 the Federal Trade Commission stated that it intended to issue an administrative ruling that non-compete provisions restricting individuals were unenforceable. The FTC took the first step toward implementing the regulation voting to publish a notice of proposed rule making in the Federal Register. After a 60 day comment period FTC can vote and adopt a final regulation. While the U.S. Supreme Court has been tending to restrict the powers of administrative agencies to enact broad Legislative type regulations, this restriction may be enforceable.

On August 20, 2024, US District Judge Ada Brown granted a motion for summary judgment submitted by the US Chamber of Commerce and other plaintiffs, while denying the FTC’s petition for a judgment in its favor

This means that the rules for non-competes apply to a doctor based upon which state law applies.  This opens cans of worms.  Which state law applies - the law where the contract was signed?  Or does the contract's own agreement as to which state law applies govern the application of a non-compete?   If a non-compete is included in a contract in California it is not enforceable but what if California law changes - is the provision still void?

The FTC has also pointed out that "Trade secret laws and non-disclosure agreements (NDAs) both provide employers with well-established means to protect proprietary and other sensitive information. Researchers estimate that over 95% of workers with a noncompete already have an NDA."  In other words there are ways to enforce a non-compete without calling it a "non-compete".   At times ownership interests in the underlying business can transform a non-compete imposed by an employer upon an employee into an arms length business to business relationship.   So even in California non-compete equivalents may have teeth.

In general, the enforceability of a physician non-compete agreement depends on various factors, including:

Applicable laws: Specific laws and regulations governing non-compete agreements and these vary greatly state to state. Many jurisdictions have specific statutes that govern the enforceability of such agreements but even similar state laws will have great variations as grey areas are decided by the courts of that specific state.

California has addressed these open questions very directly.  In Business & Professions Code § 16600.5, the state addressed the following:

• The prohibition against non-competes protects a California resident seeking to work in the state.  Nothing changess if the employer is out of state. California law applies.  

• It is a civil violation for any employer to require a California employee to sign a noncompete so that an employer can't put a non-compete into the contract hoping to enforce it when/if the law changes.

• A California employee has standing to file a lawsuit against any employer or former employer who required them to sign a noncompete   That right includes the right to get an injunction barring its enforcement, damages, and very critically attorney’s fees which encourages attorneys to take a valid case without the doctor having to put up any money up front.

In other states the following enforcement standards USUALLY apply.

Reasonableness: Courts often evaluate the reasonableness of non-compete agreements with a fairness analysis. This includes factors such as the duration of the restriction, the geographic scope, and the legitimate interests the agreement seeks to protect, such as trade secrets, patient relationships, or goodwill. These last four items are the most dangerous for individual physicians and the scope of the FTC regulation will be important in freeing individual physicians from these “borderline fair” restrictions. (Borderline fair meaning potentially enforceable even though they are onerous to the individual.)

Public interest and patient access to care: Courts may consider the impact of non-compete agreements on public interest and patient access to care. In some jurisdictions, restrictions that significantly limit patient access to medical services or create undue hardships may be viewed as unenforceable.

Scope of the agreement: Non-compete agreements should be narrowly tailored to protect legitimate business interests without imposing undue hardship on the physician. Agreements that are overly broad or excessively restrictive may be less likely to be enforced. However, these agreements are crafted (in most cases) by very experienced medical lawyers. You can be certain that these experts have crafted a provision based upon current laws and they have worded the grey area provisions so that the scope is not excessive and the “borderline fair” provisions match a court decision where the restrictive covenant was upheld.

Physicians should consult an attorney before signing any employment contract. Even if you have no power to alter a provision, you can benefit from simply understanding what the contract really says in the context of your day to day life at work. Remember, there is the honeymoon period in most employment relationships. Contract provisions are often interpreted in the Kumbaya context. A good lawyer will analyze a contract from the divorce perspective – in other words, what does the contract say when you are at odds with your partners / employer.