Last month, the Ohio Court of Appeals affirmed a surgeon’s
preliminary injunction against his former employer to prevent the enforcement
of non-competition clause in his former employment agreement. Castillo-Sang
v. The Christ Hospital Cardiovascular Associates, LLC, 2020-Ohio-6865. The Court agreed that that the clause was
unreasonable in that it sought to prevent ordinary competition, not unfair
competition, in attempting to prevent the surgeon from working for a nearby
hospital. The surgeon had already been
trained before he was hired in 2015 and he possessed no confidential or trade
secret information belonging to his employer.
Further, the clause put an undue
burden on the surgeon in attempting to earn a living and provided a
disproportionate benefit to the employer.
Finally, the clause injured the public’s interest when the surgeon was
able to perform a necessary service which was in short supply.
According to the Court’s opinion, the surgeon had completed
all of his medical training prior to being hired by the employer practice. His
employment agreement contained a one-year non-compete clause that only covered
Hamilton and contiguous counties. While
he honed his cardiac surgery skills over the next four years, there was no
evidence that the employer had provided or enabled any significant or
additional training. He informed the
employer that he intended to leave and claims that he was told that the
non-compete clause would not be enforced against him. He obtained employment with a Kentucky
hospital and filed suit to attack the non-compete clause when the employer
indicated that it would seek to enforce the clause against him. The trial court agreed with the surgeon and
the Court of Appeals affirmed.
Restrictive covenants are disfavored in the law, and “[t]his measure of disfavor is especially acute concerning restrictive covenants among physicians, which affect the public interest to a much greater degree. . . Noncompetition agreements must be strictly construed in favor of professional mobility and access to medical care and facilities. . . . “[C]ourts have recognized that the greater scrutiny is mandated by public-policy considerations, since limiting the ability of a physician to practice may affect the public’s ability to obtain medical care.” . . .But even though not favored, covenants not to compete in the medical profession are not per se unenforceable, and will be upheld if they are reasonable. . . . And, courts will enforce covenants against physicians to the extent necessary to protect an employer’s legitimate interests; if there is no legitimate interest to be protected, the noncompete is unreasonable.
By way of example,
Ohio courts have found legitimate protectable interests in upholding physician covenants not to compete. In Owusu v. Hope Cancer Ctr. of Northwest Ohio, Inc., 3d Dist. Allen No. 1-10-81, 2011-Ohio-4466, the court upheld a physician’s two-year covenant not to compete, finding that the medical center had a legitimate business interest in prohibiting the physician from using physician referral connections he developed as a result of employment with the medical center and that he could not use these connections to build a new practice.
The Court found that the covenant provided more protection
than necessary to protect the employer’s legitimate business interests. Because the surgeon had agreed in the
employment agreement that the clause was reasonable and necessary to protect
the employer’s interests in confidential and trade secret information, he had
to now prove with clear and convincing evidence that the restrictions were in
fact unreasonable. The employer
pointed to confidential information that he had concerning its future expansion
plans, its pricing structure and its referral network. However, its arguments were unconvincing.
“The purpose in allowing noncompetition agreements is to foster commercial ethics and to protect the employer’s legitimate interests by preventing unfair competition—not ordinary competition.” . . . The prevention of ordinary competition is not a legitimate business interest that can be protected by a restrictive covenant. . . . Therefore, a covenant not to compete is “valid only when the competition [it] restrict[s] is somehow unfair.”
In this case, the employer failed to identify any “targeted”
physicians that it planned to recruit, “targeted” specialties where it planned
to expand or particular markets and definite marketing plans that it planned to
execute. Further, its primary hospital
indicated that all of the surgeons received the same training and investment
and the prices were set by government payors and insurance companies, not the
employer. Further, cardiologists were
the primary source of referrals to the cardiac surgeons and other hospitals
were its primary competition, not the hospital where the plaintiff found
employment. Indeed, the evidence
indicated that cardiac surgeons spent no time soliciting patients or referring cardiologists
for business. There was no evidence
that the surgeon possessed, let alone used, any of the employer’s confidential
information, or engaged in unfair competition using such information.
The Court also found that the non-compete clause put an
undue burden on the surgeon even though he voluntarily resigned his employment
and had a job offer in Columbus. The
surgeon testified that he moved to Cincinnati to be near his wife’s family, who
provided child care, and his wife was employed at a local hospital. He argued that commuting to Columbus would be
a hardship and physically exhausting in a stressful and demanding profession.
Third, the Court agreed that it would injure the public to
restrain the surgeon from performing minimally invasive Mitral Valve surgeries,
which have far fewer complications and far quicker recovery times, etc. for
patients. None of the other surgeons at
his new hospital could perform that particular procedure.
Finally, the Court found irreparable harm to exist because
the surgeon would have to move in order to comply with the non-compete
clause. The defendant’s witness had
agreed that burnout was a genuine factor by depriving a surgeon of rest and/or
family time.
Interestingly, the parties have a pending claim involving
the surgeon’s allegation that the employer only enforced the non-compete
against Hispanic physicians. That claim
was not part of the preliminary injunction hearing or this appeal.
NOTICE: This summary is designed merely to inform and alert
you of recent legal developments. It does not constitute legal advice and does
not apply to any particular situation because different facts could lead to
different results. Information here can change or be amended without notice.
Readers should not act upon this information without legal advice. If you have
any questions about anything you have read, you should consult with or retain
an employment attorney.
