LS Law Firm New Non-Compete Health Care Restrictions in Connecticut | Seyfarth Shaw

New Non-Compete Health Care Restrictions in Connecticut | Seyfarth Shaw

As various states and federal agencies seek to prohibit or limit the use of non-competes, Connecticut joined the trend. Connecticut’s new legislation, SB 9, expands restrictions on the enforceability of physician non-competes and extends these restrictions to advanced practice registered nurses (APRNs) and physician assistants (PAs).

Connecticut: SB 9

On June 5, 2023, the Connecticut Senate passed SB 9, sending it to Governor Ned Lamont to sign into law. The governor’s signature is a formality as the bill passed both houses of the Connecticut Legislature unanimously. By limiting the circumstances in which non-competes are enforceable under Connecticut law, SB 9 adds additional restrictions to the use of such covenants in physician employment agreements while extending these restrictions to APRN and PA employment agreements. Notably, the bill was significantly amended prior to passage with earlier versions banning non-competes for physicians, APRNs and PAs entirely.

SB9: Non-Competed Physician

Under SB 9, the current restrictions applicable to physicians non-competes under Connecticut law will continue to apply. Existing law mandates that physician non-competes entered into, amended, extended or renewed on or after July 1, 2016 must be separately and individually signed and may not last longer than one year after cessation of employment or extend beyond a 15 mile radius from the physician’s primary site of practice. Unless the non-compete was entered into “in anticipation of, or as part of, a partnership or ownership agreement,” a non-compete is unenforceable against a physician if: (i) The agreement expires without renewal and the employer fails to make “a bona fide offer to renew the contract on the same or similar terms and conditions,” or (ii) the employment is terminated by the employer without cause.

If the above conditions are met, the non-compete will be enforceable only if it is: “(A) Necessary to protect a legitimate business interest; (B) reasonably limited in time, geographic scope and practice restrictions as necessary to protect such business interests; and (C) otherwise consistent with the law and public policy.”

SB 9 expands enforceability restrictions on physician non-competes entered into, amended, extended or renewed on or after October 1, 2023 by holding such covenants unenforceable if the physician does not agree to “a proposed material change to the compensation terms” of the agreement at the time of extension or renewal, or the employer allows the agreement to expire without renewal.

SB 9’s additions do not apply to group practices of fewer than 35 physicians in which the majority of ownership is made up of physicians. SB 9 also modifies the definition of “primary site of practice” by requiring that the location be mutually defined by the employer and physician in the employment agreement as opposed to defaulting to the location where a majority of the physician’s revenue was generated as the law previously did.

SB 9: APRN and PA Non-Competes

Under SB 9, APRNs and PAs are extended the same non-compete protections as physicians. All limitations and requirements described above will be applicable to APRN and PA non-competes that are entered into, amended, extended or renewed on or after October 1, 2023. There is one notable difference: the small group practice exception described above does not apply to APRNs and PAs as it does to physicians.