Are Physician Non-Compete Agreements Enforceable in the Golden State? – San Diego Health Care Attorney

At the VC Law Group, we often represent physicians and physician-based practices in their employment matters.  This includes drafting, reviewing, and negotiating physician employment agreements.  One of the most frequently asked questions we hear is whether physician non-compete clauses in those agreements are enforceable.

At the outset it is important to note that every state has its own rules regarding the enforceability of physician non-competes.  This article only deals with the laws of the State of California.

California generally prohibits non-compete agreements and clauses.  The basis for this prohibition is California Business and Professions Code §16600 which essentially states that contracts which restrain an individual from engaging in a lawful business, profession, or trade are generally void.  Medical Corporations are not excluded from the operation of Business and Professions Code §16600.

However, there are exceptions to the general rule, which are found in Business and Professions Code §§16601-16602.5.  The exceptions are for the following:

1. Non-competes in the context of sales of goodwill or corporate shares;
2. Non-competes in the context of a dissolution in a partnership or disassociation of a partner from the partnership; and
3. Non-competes in the context of agreements between members of a limited liability company not to carry on similar business within a specified locality so long as any other member of the company carries on a like business.

It is important to note that sometimes, employers may attempt to skirt the prohibitions of Business and Professions Code §16600 by explicitly making their employment agreements governed by another state’s laws.  This tactic is frequently unsuccessful, however, as California Courts typically only enforce choice of law provisions if the state has a substantial relationship to the parties or the transaction at hand, or if there are any other reasonable bases for enforcing the provision.

Please note that this is only a general overview of the enforceability of physician non-competes in California.  At the VC Law Group, we frequently represent both employers and employees in negotiating their physician employment agreements.  For more information, please contact Vik Chaudhry at the VC Law Group via telephone at (858) 519-7333 or email at info@thevclawgroup.com.