HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Monday, July 11, 2005

Physician Non-compete Ruling

Under a rather narrow set of facts, the Tennessee State Supreme Court has issued a ruling invalidating non-compete clauses between physicians and physician practices.  Holding that such agreements are against public policy, the court joins several states in ruling that physician non-competes violate public policy.  (I think Colorado and Massachusetts are two other states with similar rulings.) 

The court also ruled against buyout clauses - essentially liquidated damages.  I have to disagree with this part of the ruling.  It seems that this would be a valid way for the physician practice to recoup some of its investment in recruiting, training and retention expenses even though this is a hard number to quantify.  (I have seen liquidated damages clauses that included line items for office supply expenses.  That's a stretch when a physician group tries to recoup its costs for paperclips.)  Extreme examples notwithstanding, ruling against liquitated damages is somewhat intrusive on the freedom to contract.

Anyway - here is a link to the case.   - Jim Tomaszewski, Univ Cincinnati 3L

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