Earlier this month, a unanimous Cuyahoga County Court of Appeals affirmed a trial court’s limited enforcement of a non-compete clause imposed on a burn surgeon. MetroHealth Sys. v. Khandelwal, 2022-Ohio-77. The trial court had refused to enforce any restriction on the surgeon practicing medicine, but shortened the two-year restrictions to one year on the physician acting in a leadership capacity for a competitor within the restricted territory and from soliciting patients, employees or referral sources. “The prevention of ordinary competition is not a legitimate business interest that can be protected by a restrictive covenant.” The evidence established that most patients chose the closest burn center, making competition for patients relatively rare. The trial court had indefinitely enjoined the physician from using proprietary information and left pending tortious interference claims.
According to the Court’s opinion, the physician was an
experienced burn surgeon who was hired in 2015 with a one-year and 10 miles
non-competition agreement. The non-competition
restriction was expanded the following year to a two-year and 35 miles and a
few years later he was promoted. In
March 2020, he gave three months’ advance notice that he was going to the only
other competing facility within 35 miles of the employer. The employer brought suit to enjoin him from
working in any capacity for the competitor for two years. After a three-day hearing, the trial court
agreed only to prevent the physician from holding a management position and
from soliciting the employer’s patients, employees or referral sources for one
year, but refused to enjoin him from practicing medicine for the competitor. The court also enjoined the physician from
using or disclosing any of the employer’s proprietary or privileged information
indefinitely. The trial court did not resolve claims for misappropriation of
trade secrets or tortious interference with contract, which remain pending. The employer appealed, but the appellate
court affirmed the trial court’s order and limited restrictions.
The Court noted that under Ohio law,
A covenant restraining a physician-employee from competing with his employer upon termination of employment is unreasonable where 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 his medical expertise is critical to the people in the community.
The employer had argued that the physician had specialized
knowledge from his management position of the strengths and weaknesses of the employer,
as well as knowledge of confidential information and relationships with its
referral sources in a five-county area. The
physician testified that the relationships were between entities and not with
individual physicians, like himself.
There was also testimony that burn patients generally seek the closest
burn hospital, rather than a particular physician. Accordingly, in light of the limited
competition, the Court found that the trial court had not been arbitrary or
capricious in refusing to enjoin the physician from practice medicine in his
specialty despite the non-compete clause.
Further, the Court found that the physician would be harmed
by a restriction. He could lose his
certification and his skills would atrophy if he were prevented from practicing
his specialty for two years. He might
even have trouble getting credentialed if he had to wait two years. The Court rejected the argument that he
could work as a locum tenens positions because no such specific positions had
been identified and it would be hardship to travel so much during the
pandemic. Further, his family had
established roots in community since moving there from Arkansas in 2015 and did
not want to relocate far from the area or his daughters’ schools. His wife has medical specialty that requires
her to work within 15 miles of her assigned hospital.
The Court also found that the public would be harmed due to
a shortage of qualified burned physicians because it was a relatedly rare
specialty.
The Court also affirmed the trial court’s shortening of the
two-year restriction on the physician holding a leadership position with the
competitor. Because, as mentioned, the evidence
established that patients typically chose the closest burn center (meaning
little competition between the two entities), there was little likelihood of
harm from the physician having a leadership position after the passage of a
year and little reason to extend the restriction to two years. The Court also noted that two years was “not
standard practice.”
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.
