Tom Shumate's Tennessee Non-Compete Law Blog

Update on 2012 Amendment to Statute Governing Health Care Non-Compete Agreements

Josh McCreary wrote a good article on the status of health care non-compete agreements in light of the 2012 Amendments to Tenn. Code Ann. 63-1-148 (effective January 1, 2012), which eliminate the six-year employment limitation and extend its application to osteopathic physicians. He also discusses many of the unanswered questions created by the Legislature's continued tinkering with the language of the statute. You can read it here. 

Law Governing Physician Non-Competes Amended to Extend Employers' Ability to Enforce Them After Six Years of Employment

On April 30, 2010, the law governing non-compete agreements of most types of physicians practicing in Tennessee was amended to extend an employer's ability to enforce a non-compete agreement against a physician after employing the physician for 6 years.  Under the old law, once a physician had been employed for 6 years, the employer could no longer enforce a non-compete agreement of up to two years. Under the new law, physicians and their employers can now negotiate over this issue and can agree to extend the employer's ability to enforce a non-compete agreement beyond the initial 6 year term of employment.  The amendment makes it clear that any such extension must be freely negotiated and cannot be the result of an automatic renewal. Physician employment agreements will now be drafted to take advantage of this amendment.  For example, employers may structure employment agreements so that the term of employment expires before the 6 year term ends.  That way the employer can use the potential for an extended term of employment as leverage to get the physician to agree to extend the non-compete lapse period for another term not to exceed 6 years.

Prior to the amendment, TCA 63-1-148(a)(2) provided:

(2) Any restriction under subdivision (a)(1) shall not be binding on a healthcare provider who has been employed by, or under contract with, the employing or contracting entity for at least six (6) years.

As amended, the statute provides:

Any restriction under subdivision (a)(1) shall not be binding on a healthcare provider who has been employed by, or under contract with, the employing or contracting entity for at least six (6) years unless the healthcare provider and the employing or contracting entity mutually agree to extend the six (6) year period for a term not to exceed six (6) years. The healthcare provider and the employing or contracting entity may agree to an unlimited number of extensions of the six (6) year period so long as the extension is in writing, is supported by consideration, and each extension does not exceed a term of six (6) years. Any agreement to extend the six (6) year time period must be accomplished through subsequent negotiations and cannot be extended by an automatic renewal provision in an employment contract. Refusal by either party to extend or enter into a new employment contract shall not be considered grounds for terminating an existing employment contract so long as the employment term of the contract then in effect is a term longer than month- to-month.

 

Nashville, Tennessee Non-Compete Lawyer -- Udom Undone: Tennessee Enacts New Law Regarding Physician Non-. Compete Agreements

I wrote an article for Tennessee Medicine, the journal of the Tennessee Medical Association, regarding the new law governing physician non-compete agreements that went into effect on January 1, 2008. Read the article by clicking here.