In a recent decision from the North Carolina Court of Appeals, a physician was required to comply with a non-compete covenant in an employment agreement with his former medical practice.  This case illustrates how North Carolina law authorizes enforcement of a non-compete covenant against a physician when the covenant is reasonable in its duration and the geographic area it covers and does not pose a serious threat of substantial harm to public health needs.

In Boice-Willis Clinic, P.A. vs. David Seaman, M.D., the Physician had entered an employment agreement with a Clinic that contained a non-compete covenant.  The Clinic was a multispecialty medical practice and the Physician was a general and vascular surgeon with special training and experience in gastrointestinal surgical procedures.  The non-compete covenant required that, for two years after his employment with the Clinic ended, the Physician could not be employed with a competitive medical practice or surgical facility located within 25 miles of the hospital where the Clinic’s physicians performed most of their surgeries, nor could he solicit any of the Clinic’s patients with whom he had contact and who had been treated at the Clinic within the 18 months before the Physician left the Clinic.

When the Physician resigned from his job with the Clinic and opened his own general surgery practice in the same town, the Clinic filed suit against him seeking an injunction to enforce the non-compete covenant.  The trial court issued an injunction against the Physician requiring only partial compliance with his non-compete covenant.  The trial court ordered that the Physician could not advertise a medical or surgical practice within a 25-mile radius of the hospital in question, nor could he treat any patient who had been treated at the Clinic within the prior 18 months unless the patient was referred to him for a second opinion and needed a surgical procedure within the Physician’s specialty or had a life-threatening or emergency situation.  The trial court’s order specifically allowed the Physician to practice at a long-term care facility within the 25-mile circle.

Both parties appealed the injunction issued by the trial court.  The Physician appealed and sought to have the injunction lifted.  The Clinic appealed and sought to have the non-compete covenant enforced in full.

The Court of Appeals held that a non-compete covenant can be enforced against a physician if it protects the employer’s legitimate interests, is not unreasonable and overbroad, and does not pose a serious threat of substantial harm to public health needs.  The Court ruled that the two-year duration of the non-compete covenant and the 25-mile circle it covered were not unreasonable or overbroad.  In addition, the Court determined that enforcement of the covenant in full would not pose a serious threat of substantial harm to public health needs because there was no shortage of general surgeons within the 25-mile circle, no potential for monopoly by a single surgeon or medical practice in that area, and no indication that limiting competition would have an impact on fees or the availability of a doctor in times of emergency in that area.  In making this determination, the Court relied on evidence showing that there were at least thirteen general surgeons practicing within the 25-mile circle, only four of whom were employed with the Clinic. 

The Court of Appeals also concluded that the interest of patients in having a choice in selecting a physician would not be adversely affected by full enforcement of the non-compete covenant against the Physician.  In reaching this conclusion, the Court reasoned that while the non-compete covenant required the Physician’s practice to be located outside the 25-mile circle, it did not prevent the Physician from treating patients who resided within that area.

As a result, the Court of Appeals remanded the case to the trial court and required that the injunction against the Physician be strengthened to require full enforcement of the non-compete covenant against him.  Because of its holding that the covenant was not unreasonable or overbroad and did not pose a serious threat of substantial harm to public health needs, the Court of Appeals ruled that the trial court engaged in an erroneous attempt to “rewrite” the non-compete covenant when it issued a limited injunction requiring only partial compliance with the covenant.   

The Physician has requested the North Carolina Supreme Court to review the Court of Appeals’ decision in Boice-Willis Clinic, and it remains to be seen whether the Supreme Court will accept review of it.  In any event, the Court of Appeals’ opinion in Boice-Willis Clinic illustrates the importance of making sure that a non-compete covenant in a physician’s employment agreement is reasonable in its duration and the geographic area it covers.  Medical practices and other healthcare providers should be especially careful in this respect regarding a non-compete covenant for a physician when there are a limited number of other physicians practicing in his or her specialty in the geographic area protected by the covenant.

For questions about this article or other employment law matters, please contact Louis Meyer at lmeyer@poynerspruill.com or 919.783.2810 or Susie Gibbons at 919.783.2813 or sgibbons@poynerspruill.com.  For questions about other healthcare law matters, please contact Wilson Hayman at 919.783.1140 or whayman@poynerspruill.com.