Healthcare Non-Competes

Apr 30, 2023

So you're wondering about non-compete agreements in Tennessee? It's not as simple as just including a clause and trapping your employees! In fact, Tennessee generally doesn't like non-competes because they can limit an employee's ability to find work. But, it's not impossible to enforce them. You just have to make sure they're reasonable and protect a legitimate business interest.

What must be included in the non-compete in order to be enforceable in Tennessee?

In order for a non-compete to restrict the right of a healthcare provider, as defined by T.C.A § 63-1-148(c) to practice following the termination of their employment, the non-compete must meet the following requirements:

• In writing and signed by both parties;

• The restriction does not extend past 2 years from the date of termination;

• The geographic restrictions do not exceed a ten-mile radius from the provider's practice site or the county in which the provider practiced; OR no geographic restriction exists but the agreement prohibits the provider from practicing in any facility for which the employer provided services while the provider was employed.

How do non-compete agreements when I am selling my medical practice?

Often physicians enter into non-compete agreements in conjunction with the sale of their medical practice. Non-compete agreements will be enforceable, under these circumstances when the restrictions are reasonable pursuant to T.C.A § 63-1-148. T.C.A. § 63-1-148(d) creates  a rebuttable presumption that the duration and area of restriction agreed upon by the parties  are reasonable. Additional restrictions exist for:

• Hospitals;

• Renal dialysis clinics;

• Faculty practice plans and;

• Nursing homes.

Non-compete restrictions for non-physician practitioners:

Unlike for physicians, Tennessee law has not codified any statutes specifically addressing non-compete agreements for non-physician healthcare providers. Like with physicians, Tennessee law disfavors the use of restrictive non-competes for non-physician practitioners such as NPs, PAs, and CRNAs. Nevertheless, non-competes will be enforceable so long as their restrictions are reasonable and protect a legitimate business interest. Factors considered in determining the reasonableness of the restrictions are:

• Geographic and time restrictions;

• The effect on public policy if the restriction was enforced and vice versa;

• The economic hardship to the terminated employee;

• Harm to the employer if the provision is not enforced;

• Whether there is sufficient consideration.

Murfreesboro Med. Clinic, P.A. v. Udom, 166  S.W.3d 674, 678 (Tenn. 2005)