Non-competition and non-solicitation agreements are often legitimate tools to protect employers from spending time, money and effort training their employees, only to have those employees leave and open up a competing business across the street. Typically, such agreements (often called “restrictive covenants”) seek to restrict former employees from engaging in certain competing activity within a geographical area and for a specific period of time. Rhode Island courts have historically been mildly supportive of such restrictions, as long as they were reasonable in time and scope, and were tailored to protect an employer’s legitimate business interests.

This year, however, the Rhode Island Superior Court and General Assembly both determined that such restrictive covenants for physicians were unlawful and, therefore, unenforceable. In March, Judge Michael Silverstein determined that the public’s interest in allowing individuals to retain the health care service providers of their choice outweighed a physicians’ employer’s interest in avoiding competition from its former physician employee. Judge Silverstein noted that Rhode Island did not have a specific law (such as the law in Massachusetts) which outlaws restrictions on a physician’s right to practice within a particular area for a specific period of time after leaving a medical practice.

This month, Governor Raimondo agreed with the General Assembly and signed this bill, which, for all practical purposes, codifies Judge Silverstein’s ruling by making restrictive covenants in the physician context unenforceable. The new law (which appears to have been modeled after the Massachusetts law cited by Judge Silverstein) voids any restrictions on a physician’s ability to practice medicine within a geographic area, as well as his or her ability to treat a current patient of the physician’s employer. The only exception would be situations where a physician agreed to a restrictive covenant as part of the sale of his or her practice, which is capped at five years.

With the law now in place, physicians should keep this new restriction in mind when they form associations with other physicians, either as employees or as part of the purchase and sale of an existing practice.

If you have any questions about restrictive covenants or employee agreements, please contact PLDO Partner Brian J. Lamoureux at 401-824-5100 or [email protected]. We welcome your comments, questions and suggestions.

Non-competition and non-solicitation agreements are often legitimate tools to protect employers from spending time, money and effort training their employees, only to have those employees leave and open up a competing business across the street. Typically, such agreements (often called “restrictive covenants”) seek to restrict former employees from engaging in certain competing activity within a geographical area and for a specific period of time. Rhode Island courts have historically been mildly supportive of such restrictions, as long as they were reasonable in time and scope, and were tailored to protect an employer’s legitimate business interests.