iThe Louisiana Legislature recently unanimously passed Act No. 273, which limits noncompete agreements for physicians in the state. The act requires all applicable new noncompete agreements to sunset after three years for primary care physicians and after five years for all other physicians, and it limits the application of noncompete provisions to just the parish in which the physician primarily practices and two contiguous parishes. Governor Jeff Landry signed the act into law on May 28, 2024, and the act’s provisions will apply to all physician contracts on January 1, 2025.
Quick Hits
- Act No. 273 modifies La. Rev. Stat. § 23:921, Louisiana’s noncompete statute, to limit the noncompete restrictions allowed in contracts with physicians.
- Any contract that restrains a primary care physician from practicing medicine expires three years after the effective date of the contract and all other physicians five years after the effective date of the contract. Any subsequent contract may not include a noncompete provision.
- The noncompete agreement must specify the parish where the physician’s principal practice is located and no more than two contiguous parishes in which the physician may be prohibited from competing. The law does not discuss how a physician’s “principal” location is determined.
- The noncompete prohibition cannot exceed a period of more than two years from the termination of employment.
- The provisions of Act No. 273 will apply to any contract executed on or after January 1, 2025, and to contracts already in effect on that date.
To Whom Does Act No. 273 Apply?
Act No. 273 applies to both “primary care physicians” and all other physicians, but with different regulations for each. “Primary care physicians” are defined as physicians who predominately practice in these fields:
- General family medicine
- General internal medicine
- General pediatrics
- General obstetrics
- General gynecology
The act does not apply to any physician employed by or under contract with a rural hospital, as defined by the Rural Hospital Preservation Act, La. Rev. Stat. § 40:1189.1, et seq. Rural hospitals generally have no more than sixty hospital beds and are located in a parish or municipality with a low population, as defined by statute. Rural hospitals do not include long-term care hospitals, rehabilitation hospitals, or free-standing psychiatric hospitals.
Restrictions on Noncompete Agreements for Physicians
Act No. 273 provides that any contract or agreement with a primary care physician that contains a provision restraining the primary care physician from practicing medicine expires three years from the effective date of the contract or agreement. Any subsequent contract or agreement executed after the initial three-year term must not include any noncompete provisions. For all other physicians, any contract that restrains the physician from practicing medicine expires five years from the effective date of the contract, and any subsequent contract must not include any noncompete provisions.
If a contract or agreement within the initial three- or five-year term is terminated, the physician may be prohibited from competing with the employer in the parish in which the physician’s principal practice is located and no more than two contiguous parishes in which the employer carries on a similar business, which must be specified in the contract or agreement. The noncompete provision in the contract or agreement cannot exceed a period of more than two years from termination of employment.
With Governor Landry’s signature on May 28, 2024, the provisions of the act now apply to any applicable contract executed on or after January 1, 2025. For any contracts already in existence, the initial three- or five-year term provided for in the act begins to run on January 1, 2025, and the geographic provisions will become applicable on that date as well.
