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As healthcare attorneys, we are noticing that many Ohio physicians are still confused about the enforceability of employment agreement noncompete provisions. The bottom line is that reasonable noncompete agreements are still enforceable in Ohio. Many physician employers (including physician practices, health systems and other organizations) still take noncompete provisions seriously and are willing to enforce them. 

Physicians should not sign any noncompete agreement unless they are willing to abide by its terms. Further, they should not assume that a current or prior employer will look the other way if a noncompete is violated. Physician clients often tell us that they do not need to worry about a noncompete because an employer’s representative has promised that the noncompete will not be enforced. But these representatives are often not the ultimate decision maker. In general, a physician should only rely upon promises that a noncompete will be ignored if a binding waiver or amendment to the restriction is in writing. Depending upon the circumstances, noncompete violations can result in financial liability for both the breaching physician and subsequent employers. Under some circumstances, courts can also force physicians to stop violating noncompete provisions and leave their employment. This can be stressful and disruptive for all involved.   

Noncompete agreements have been at the center of important policy and legal discussions during recent years. Because the restrictions typically places limitations on the ability of a physician to work for other employers, they can sometimes impact a physician’s ability to make a living, provide continuity of care to patients, and to serve the community. Not only the physician, but also their families, potential employers, patients and the community more broadly, can be adversely affected. 

The American Medical Association (AMA) argues that unfair noncompete clauses in physician employment contracts hinder career advancement and patient access to care, advocating for their removal. By removing noncompete clauses from these agreements, the AMA believes this change will benefit both physicians and patients.

At the same time, employers often heavily depend upon noncompete provisions, as well as confidentiality, non-solicitation, non-interference, non-disparagement and other restrictive covenants, to protect their organization’s proprietary information. Noncompete agreements allow health systems and other employers to protect their assets and invest in their workforce. 

Despite their widespread criticism across the healthcare industry, noncompete agreements remain legal in most states. In Ohio, noncompete agreements are enforceable if the restrictions imposed 1) are no greater than necessary for the protection of the employer’s legitimate business interests; 2) do not impose undue hardship on the employee; and 3) are not injurious to the public.[1]

Courts evaluate several factors when determining the reasonableness of a noncompete agreement such as the geography and time limits, whether the former employee had access to confidential information and trade secrets, and if the agreement is an attempt to eliminate unfair competition as opposed to ordinary competition.[2] Although noncompete agreements are enforceable in Ohio so long as they are reasonable, courts have exercised their authority to strike any unreasonable provisions from these agreements.

Under Ohio law, a physician noncompete agreement is considered unreasonable if it imposes undue hardship on the physician and is injurious to the public, the physician’s services are vital to the health, care and treatment of the public, and the demand for the physician’s medical expertise is critical to those in the community.[3]

In MetroHealth System v. Anjay Khandelwal, MD, a burn surgeon’s noncompete agreement prohibited him from providing similar care within 35 miles of MetroHealth for two years after he left the Cleveland-based health system. The trial court determined that the two-year, 35-mile restriction exceeded MetroHealth’s business interest of protecting itself from unfair competition. Dr. Khandelwal’s noncompete agreement adversely impacted his career and burn patients in need of necessary care. In consideration of the limited number of burn surgeons serving the community, as well as several other factors, the court determined that Dr. Khandelwal’s noncompete agreement was more restrictive than necessary. As a result, the court modified the agreement to protect both MetroHealth’s legitimate business interests and Dr. Khandelwal’s own interests through more reasonable terms, effectively keeping the health of the community at the forefront.[4] The outcome in MetroHealth System demonstrates that while healthcare employers may require their physicians to sign noncompete agreements, these agreements will not be upheld if they contain terms that are unreasonably restrictive.

The FTC previously estimated that banning noncompete agreements altogether would lead to greater innovation, an increase in new businesses, and higher earnings for U.S. workers. As a result, the FTC issued a final rule last April, 2024 banning these agreements. However, in August, a court in Texas stopped the ban from taking effect. The FTC has since appealed. In the meantime, the court’s order does not prevent the FTC from addressing the enforceability of noncompete agreements on a case-by-case basis.

With a new administration, it is unclear whether the FTC will ultimately be successful in implementing its noncompete ban. President Trump appointed Andrew Ferguson, who opposed much of the FTC’s rulemaking agenda under its former leader, Linda Khan, to serve as the new Chair of the FTC. Ferguson has argued that the FTC lacks clear authority from Congress to write substantive rules.

Ohio physicians should consult with a healthcare attorney before negotiating noncompete provision terms and before making decisions on future employment when a noncompete will impact post-employment options. Ohio physicians should also stay abreast of developments in this controversial and evolving area of the law. If you have any questions about a noncompete agreement or need guidance on your employment contract, please contact BMD Member Kate Hickner at kehickner@bmdllc.com or Attorney Kate Crawford at khcrawford@bmdllc.com.

[1] Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 325 N.E.2d 544 (1975).

[2] See Extine v. Williamson Midwest, Inc., 176 Ohio St. 403, 200 N.E.2d 297 (1964).

[3] See Williams v. Hobbs, 9 Ohio App.3d 331, 460 N.E.2d 287 (1983).

[4] MetroHealth System v. Khandelwal, 183 N.E.3d 590, 2022-Ohio-77 (2022).