On June 25, 2019, Florida Governor Ron DeSantis signed into law a new addition to Florida’s non-competition law which significantly alters the enforceability of certain physician non-competition agreements.
Section 542.336, Florida Statutes, provides that as of July 1, 2019, non-competition agreements entered into between specialist physicians and an entity which employs or contracts with all physicians of that specialty in a specific county are void and unenforceable.
Last month, a federal judge in the Northern District of Florida declined to block the new non-competition law in 21st Century Oncology, Inc. v. Moody, No. 4:19cv298-MW/CAS, 2019 WL 3948099 (N.D. Fla. Aug. 21, 2019). In that case, the plaintiff, a company that employs a variety of physicians in several Florida counties, asked the court to enjoin the enforcement of the new law and contended that the law violates the Contracts Clause, Due Process Clause, and Equal Protection Clause of the United States Constitution.
The federal judge denied the plaintiff’s request for an injunction and reasoned that the new law does not violate the Contracts Clause because it serves a significant and legitimate public purpose. The federal judge reasoned “[t]he ostensible public purpose of section 542.336 is to reduce healthcare costs and improve patients’ access to physicians” and “[i]t is well settled that access to affordable healthcare is a legitimate state interest.” Id. at *4. The court rejected the plaintiff’s due process argument and concluded that the new law is not void for vagueness because an ordinary reasonable person would have fair notice of its scope and meaning. Lastly, the court rejected the plaintiff’s equal protection argument because the new law does not involve fundamental rights or suspect classes, thus, it can be readily upheld under rational basis review.
This new law considerably changes Florida’s prior established non-competition law which generally upheld the validity of non-competition agreements so long as they were reasonable in geographic scope and duration as well as supported by legitimate business interests. While this new law is a landmark deviation from prior Florida non-competition law, the new law’s effect will mainly be limited to voiding physician non-competition agreements in rural areas of Florida. Nonetheless, physician employers should be aware of the new law and seek legal counsel to assess the enforceability of their non-competition agreements.