Since July 1, 2016, Connecticut has had a law (CGS §20-14p) which, among other things, places a one year and 15 mile restriction on all physician non-compete agreements. Effective July 1, 2023, the law has been revised (Public Act 23-97) to add some new restrictions applicable to physician non-competes and, as of October 1, 2023, the law will also extend to non-competes with advanced practice registered nurses (APRNs) and physician assistants (PAs). Both large and small health care providers need to be aware of these changes and should review their non-competition agreements and procedures for renewing such agreements to ensure compliance with these changes to the law and to avoid issues with agreement enforceability going forward.
Amendments to Current Physician Non-Compete Statute
The current version of the law states that the 15 mile radius restriction runs from the “primary site where such physician practices” and defines “primary site” as either: (a) the site where a majority of the revenue derived from the physician’s services is generated; or (b) any other office, facility or location where the physician practices and mutually agreed to by the parties and identified in the non-compete. The revised law requires that the 15 mile radius restriction must run from “any single office, facility or location where such physician practices, as mutually agreed to by the parties and defined in the covenant not to compete.” The revenue generation portion of the definition has been eliminated.
As under current law, the new law provides that physician non-competes must be separately and individually signed by the physician and are enforceable only if they are: (a) necessary to protect a legitimate business interest; (b) reasonably limited in time, geographic scope, and practice restrictions as necessary to protect such business interest; and (c) otherwise consistent with the law and public policy.
The new law also retains the provision set forth in CGS §20-14p(b)(2)(B), which renders physician non-competes unenforceable if: (i) the employment contract or agreement (not made in anticipation of, or as part of a partnership or ownership agreement) expires and is not renewed, unless, prior to such expiration, the employer makes a bona fide offer to renew the contract on the same or similar terms and conditions; or (ii) the employment or contractual relationship is terminated by the employer, unless such employment or contractual relationship is terminated for cause.
New Requirements Large Employers Must Comply with When Renewing or Extending Physician Non-Competes
The amended law adds a new provision effective for certain covenants not to compete entered into, amended, extended or renewed on or after October 1, 2023. Specifically, physician non-competes (presumably, regardless of whether or not they are made in anticipation of, or as part of, a partnership or ownership agreement) will no longer be enforceable if: (A) the physician does not agree to a proposed material change to the compensation terms prior to or at the time of the extension or renewal of the contract; and (B) the contract expires and is not renewed by the employer or the employment or contractual relationship is terminated by the employer, unless such employment or contractual relationship is terminated by the employer for cause.
Importantly, this provision does not apply to covenants not to compete that are entered into between a physician and a group practice of 35 or fewer physicians, the majority ownership of which is comprised of physicians. This new provision appears to be aimed at a continuing concern by the legislature to protect physicians in large medical groups when these type of employers change compensation based on changing wRVU rates, or enter into managed care payor contracts that end up reducing overall reimbursement to physicians.
New Restrictions on APRNs and PA Non-Competes
The revised law largely extends the current and revised statutory conditions and limitations on physician non-compete agreements to APRN and PA non-compete clauses entered into, amended, extended, or renewed on or after October 1, 2023, including the provision rendering non-competes unenforceable if the APRN/PA does not agree to a proposed material change to the compensation terms prior to or at the time of contract extension or renewal. However, unlike the comparable compensation provision in the physician non-compete statute, the provision in the APRN/PA non-compete statutes does not contain the exception for group practices of 35 or fewer physicians noted above, giving these advanced practice providers an additional measure of protection.
Takeaways for Health Care Employers
Health care employers should review their non-competition agreements to ensure they are compliant with the new changes to the law to avoid issues with enforceability. For example, the geographic restriction must define a single office, facility or location where the practitioner practices which is mutually agreed to by the parties. They should also examine their practices and procedures for renewing non-compete agreements to ensure they do not run afoul of either the current or the new restrictions, particularly when changes in compensation are contemplated, as these covenants will not be enforceable if a physician in a large group practice or an APRN or PA does not agree to a change in compensation and the agreement expires or is not renewed, or is terminated by the employer for a reason other than for cause.