Any physician non-compete entered into before July 1, 2020 is governed by Indiana common law. Since July 1, 2020, in order for a physician non-compete to be enforceable in Indiana, such non-compete agreement must include the following:

1. A provision requiring the employer to provide a departing physician with a copy of any notice concerning such physician’s departure from the employer and sent to any patient seen or treated by the physician during the two-year period preceding the physician’s departure from the employer.

2. A provision requiring the employer to, in good faith, provide the physician’s last-known or current contact information to any patient requesting updated contact information for such physician if such patient was seen or treated by the physician during the two-year period preceding such physician’s departure from the employer.

3. A provision granting the physician with either access to or copies of any medical record associated with a patient receiving notice of a physician’s departure or requesting updated contact information for a departing physician as described above.

4. A provision granting a departing physician the option to purchase a complete and final release from the terms of an enforceable physician noncompete agreement at a reasonable price.

5. A provision prohibiting the employer from providing a patient’s medical records to a requesting physician in a format that materially differs from the format used to create or store the record during the ordinary course of business, unless otherwise agreed by the employer and departing physician.

However, a new law went into effect on July 1, 2023, which further restricts physician non-compete agreements between employers and physician employees. This law applies to non-compete agreements with physicians entered into on or after July 1, 2023.

In addition to the foregoing five requirements outlined above, this new statute tells us a physician non-compete is unenforceable if: (1) The employer terminates the physician’s employment without cause; (2) The physician terminates the physician’s employment for cause; (3) The physician’s employment contract has expired and the physician and employer have fulfilled the obligations of the contract.

What does “for cause” or “without cause” mean? Since the statute does not define those terms, there is room for the parties to these non-compete agreements to dispute whether the reason for the termination of a physician’s employment was “with or without cause,” which in turn could render an otherwise enforceable non-compete unenforceable. Thus, an employer’s failure to explicitly set forth the alleged acts or omissions giving rise to a “for cause” termination for a physician increases the risk that the physician’s non-compete may be deemed unenforceable.

The new statute also establishes a process for negotiating a “reasonable” buy-out purchase price of an enforceable physician non-compete agreement. The statute does not address, however, how a “reasonable” buy-out is determined, which leaves room for dispute as to this potential ambiguity in the statute.

Employers of physicians, and physicians themselves, should acquaint themselves with this new statute and plan accordingly as to any potential non-compete agreement.

See I.C. 25-22.5-5.5-2 for the full statute.

This article is for information purposes only and is not intended to constitute legal advice.

Posted in Labor, Employment & Worker’s Compensation

About Georgianne Walker