Physician non-competition agreements in Michigan

Unlock Non-Compete Agreements: Keys to Escape

posted by Neil Klingshirn  |  Jan 22, 2010 4:08 PM [EST]  |  applies to Ohio

Michigan non-competition agreement law states that an employer may protect an employer's reasonable competitive business interests, but its protection in terms of duration, geographical scope, and the type of employment or line of business must be reasonable. Additionally, a restrictive covenant must be reasonable as between the parties, and it must not be specially injurious to the public. Even so, Michigan courts do not prohibit physician non-competition agreements. Rather, in a medical setting, a restrictive covenant can protect against unfair competition by a physician.

Non-competition agreements can restrict Michigan Physicians

Michigan courts will uphold physician non-competition agreements that:

  • prevent the loss of patients to departing physicians,
  • protect an employer's investment in specialized training of a physician, or
  • protect an employer's confidential business information or patient lists.

St. Clair Med., P.C. v. Borgiel, 270 Mich. App. 260, 267-270 (Mich. Ct.App. 2006) (referencing Berg, Judicial enforcement of covenants not to compete between physicians: Protecting doctors' interests at patients' expense, 45 Rutgers L Rev 1, 17-18 (1992)).

A non-competition agreement can prevent a physician from using patient contacts gained during the course of his or employment to unfair advantage in competition with plaintiff.  According to the Borgiel court, the risk of unfair competition in this context does not result from access to patient lists, but from the risk that patients will seek to follow a departing physician. The Borgiel
court held:

Where the physician-patient relationship was facilitated by a physician's association with his employer or resulted from advertising dollars expended by that employer, a physician can unfairly take advantage of the employer's investments in advertising and goodwill when competing with the former employer to retain patients. Here, plaintiff operated clinics located in the cities of Yale, St. Clair, and Port Huron, which drew patients residing throughout St. Clair County. Plaintiff expended funds to advertise its services in these cities. Defendant practiced medicine for plaintiff for approximately 20 months and took advantage of plaintiff's goodwill in the community and advertising expenditures to attract patients. We conclude that the covenant protected plaintiff from unfair competition by defendant and therefore protected a reasonable competitive business interest as required by MCL 445.774a(1).

St. Clair Med., P.C. v. Borgiel, 270 Mich. App. 260, 267-270 (Mich. Ct. App. 2006) (upholding a prohibition on any medical practice within seven miles of the two offices where the employer expected the physician to work).

Principles of Medical Ethics Reflect Michigan Law

The Borgiel court also ruled that the Principles of Medical Ethics issued by the American Medical Association, which state that restrictive covenants are unethical only if they are excessive in geographical scope or duration, merely reflect the Michigan rule of reasonableness. Specifically, the AMA Principles of Medical Ethics

discourage any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment,  partnership, or corporate agreement” and designates unethical those “restrictive covenants that are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients' choice of physician.”

AMA, E-9.02: Restrictive Covenants and the Practice of Medicine.

posted by Neil Klingshirn  |  Jan 22, 2010 4:08 PM [EST]  |  applies to Ohio

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