June 14, 2023
By: Salvatore G. Gangemi and Stephanie Sprague Sobkowiak
Connecticut’s legislature has amended the state’s physician noncompete law to provide for additional restrictions on physician noncompete agreements. (Public Act No. 23-97). In addition, Connecticut has extended noncompete restrictions to advanced practice registered nurses (nurse practitioners) and physician assistants. Governor Lamont is expected to sign the amendment, but has not yet done so.
Further Restrictions on Physician Noncompetes
In 2016, Connecticut significantly limited the use of physician noncompete agreements by requiring that such agreements entered, amended, extended or renewed after July 1, 2016, be rendered void if (i) the noncompete period exceeded one year; and (ii) it contained a geographical scope exceeding 15 miles from the physician’s “primary site” of practice. In addition, the 2016 law rendered physician noncompetes unenforceable if the employer terminated the physician without cause, or if a noncompete agreement expired and the employer did not offer to renew the noncompete upon the “same or similar conditions” unless the agreement was entered in contemplation of partnership or ownership.
The new amendment imposes additional requirements on physician noncompetes. A noncompete agreement that is entered into, amended, extended or renewed on or after October 1, 2023, shall be void if (i) the physician does not agree to a proposed material change to the compensation terms prior to or at the time of extension or renewal; and (ii) the contract expires and is not renewed by the employer or the employment or the contractual relationship is terminated by the employer, unless such employment or contractual relationship is terminated by the employer for cause. These new restrictions on physician noncompetes do not apply to physician groups of 35 or fewer physicians that have majority ownership comprising physicians.
In addition, the amendment requires that the noncompete agreement define the primary site of practice for purposes of the geographical restriction. This should result in fewer disputes concerning a physician’s primary practice site, but will result in less flexibility for employers that at some point during the relationship require physicians to work at other sites that were not contemplated upon signing.
Nurse Practitioners and Physician Assistants Now Covered by Connecticut Noncompete Law
As of October 1, 2023, agreements with nurse practitioners and physician assistants will be covered by the noncompete law in the same manner as agreements with physicians. However, unlike the small physician group exception that applies to the newest restrictions on physician noncompetes, all employers, regardless of size and composition, are required to comply with all of the new noncompete restrictions for nurse practitioners and physician assistants. Consequently, the requirement relating to the need to agree to a proposed material change to compensation prior to or at the time of extension or renewal is applicable to all employers of nurse practitioners and physician assistants, even small physician group employers.
Takeaway
The amendment reflects a significant change to Connecticut law, particularly because it adds nurse practitioners and physician assistants to those covered by the law. Moreover, it appears that the “proposed material change to the compensation terms” language is intended to clarify that compensation makes all the difference when making a renewal proposal, and that it is not enough that the proposed renewal terms result in the “same or similar conditions” when viewed in their totality.
Under the “material change to the compensation terms” standard, a noncompete may not be enforceable where an employer offered significantly better non-monetary terms and conditions in exchange for materially less compensation; while such a proposal might render the conditions of employment to be the same or similar, the noncompete apparently would not survive under the new amendment. Further case law developments should clarify this language, and what would result in a “material change” to compensation.
Our Health Care and Labor and Employment practice groups are monitoring these developments closely and will continue to provide updates. In the meantime, our attorneys are available to assist you with reviewing your existing noncompete agreements and preparing for the new amendment’s effective date.
Watch a recent webinar on healthcare noncompetes featuring Stephanie Sprague Sobkowiak and Salvatore Gangemi.
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