Louisiana Limits Scope of Noncompetes for Physicians

A Louisiana law passed unanimously by the state’s legislature and signed by Gov. Jeff Landry (R) in May could dramatically change noncompete contracts between physicians and their employers, although the effects won’t be felt for years, according one legal expert.

The new law, known as Act No. 273, will restrict noncompete agreements for doctors — especially for primary care physicians — by limiting the length and geographic scope of those contracts. It will require all noncompete contracts to expire after 3 years for primary care physicians and after 5 years for most other physicians.

The law defines primary care physicians as those who primarily practice in nonspecialized areas of family medicine, internal medicine, pediatrics, obstetrics, and gynecology.

However, C. Matthew Harrell, JD, MPH, an associate specializing in physician contracting at Phelps Dunbar LLP, told MedPage Today the Louisiana law will likely not have an immediate effect on physician hiring, such as recruiting practices or turnover.

“We won’t see the effects of people being freed from noncompetes until 2028 for primary care physicians and 2030 for the specialists,” Harrell said. “We’ll see after the actual 3 to 5 years is up if there’s any change.”

While the law’s restrictions will not take effect until Jan. 1, 2025, any preexisting contracts will have to include updated language reflecting its restrictions and time constraints to remain enforceable after that point, Harrell pointed out, which likely means immediate change for new contracts signed the rest of this year.

Notably, the law will not apply to any physicians who are employed by rural hospitals or federally-qualified health centers.

Still, Harrell said that the law exemplifies how efforts to reform physician contracts can find a middle path that can appease both physicians and their employers.

“It’s a compromise that most people are happy with,” Harrell said. “It did reflect a genuine compromise between the groups who had historically been pushing for the elimination or regulation of noncompetes — which would be physician groups — and the hospital groups or other healthcare employers.”

In addition to contract time restrictions, Act No. 273 will also require all noncompete agreements to name just three parishes (counties) where contracts will apply, including the physician’s primary practice location.

The law also specifies that noncompete challenges cannot exceed more than 2 years after a physician’s employment ends with the contracted employer.

Robert Hart, MD, chief physician executive of Ochsner Health — the state’s largest nonprofit academic healthcare system — said his organization did play a role in shaping the new law.

“By collaborating with the Governor’s administration, the Louisiana Department of Health and the state legislature in developing the non-compete legislation that Governor Landry signed into law, Ochsner remains focused on what is most important: continuing to be the best place to receive and deliver care while ensuring no physician leaves the state due to a non-compete agreement,” Hart said in a statement provided to MedPage Today.

While the new law was seen as win for many physicians and healthcare centers in the state, a pending federal rule from the Federal Trade Commission (FTC) could soon render it moot. Earlier this year, the FTC announced a new rule banning most noncompete agreements nationwide with few exceptions.

The rule was set to go into effect on Sept. 4, 2024, but it is currently being challenged in Texas federal court. The judge presiding over the case, Ada E. Brown of the U.S. District Court for the Northern District of Texas, recently announced that a decision should be expected by July 3, as reported by Bloomberg Law.

Harrell explained that if the FTC rule goes into effect, the Louisiana noncompete law could become “meaningless.” Still, he noted that there would likely be some distinctions between which healthcare employers might be subject to the FTC rule versus the state law.

Regardless of whether the FTC ruling renders the state law less meaningful, Harrell suggested that physicians and healthcare employers become familiar with its provisions. He also noted that this law could be a good example for how the different interest groups could work together to develop rules around noncompetes that work for both physicians and their employers.

“For physicians who are wanting to try to change their state’s laws, Louisiana could be a good case study for making a more modest change that still achieves some of the goals that physicians might have in limiting their noncompetes,” Harrell said.

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