Non-compete clauses in healthcare professionals' practice contracts: what you need to know

While it is common to see non-compete clauses in healthcare professionals' practice contracts, they must be drafted with the utmost care to avoid being challenged in court.

Generally speaking, these clauses, which are interchangeably referred to as "non-compete clause" or "non-reinstallation clause," must be limited in time and space.

But in relations between health professionals, these limits must take into account the specificities related to the ethical rules and public health requirements applicable to these professions.

Thus, case law considers that to be enforceable, a non-compete clause included in a contract with a health professional governed by the public health code must be proportionate to the legitimate interests to be protected, namely the preservation of the practitioner's patient base.

In a judgment of May 11, 1999 concerning a provisional partnership agreement concluded between two doctors, the First Civil Chamber of the Court of Cassation ruled that the non-compete clause must be proportionate to the legitimate interests to be protected, considering the duration of the contract and the place of practice of the profession. (Cass. civ 1ère, May 11, 1999, No. 97-14.493)

Recently, the Colmar Court of Appeal, in the context of a partnership agreement concluded between two doctors, recalled that a non-compete clause was only valid if it was essential for the protection of the legitimate interests of the company and allowed the debtor to continue to normally exercise his professional activity. (CA Colmar, January 27, 2020, No. 17/03013)

It follows that a non-compete clause is only applicable if it serves to protect legitimate interests, such as preventing patient poaching, and is proportionate to those interests, meaning it respects the fundamental principles of the patient's free choice of practitioner and freedom of practice.

*          The patient's free choice is enshrined in Articles L.1110-8 of the Public Health Code, and more specifically for doctors in Article R.4127-6, which states that "the doctor must respect the right of every person to freely choose their doctor. He must facilitate the exercise of this right."

The Colmar Court of Appeal, in its judgment of January 27, 2020, thus noted that the non-reinstallation clause provided for in the association contract concluded between two doctors infringed on the patient's freedom to choose their doctor, as it prohibited one of them from relocating within a radius of 5 km, making it impossible to practice their activity in the city where their patients were domiciled.

*          As for the freedom of establishment, it is not uncommon for judges to decide to set aside non-compete clauses that infringe upon it.

Thus, the non-reinstallation clause within a radius of 30 km for 3 years was deemed devoid of effect and binding force (CA Poitiers, January 12, 2016, No. 15/00530), and the non-reinstallation clause within the municipality of the practice or within a radius of ten kilometers around for 5 years was deemed unlawful as it could seriously infringe the fundamental principle of free exercise of a professional activity (Cass. Civ 1ère, October 16, 2013, No. 12-23.333).

It therefore appears essential to pay particular attention to the drafting of non-competition clauses in practice contracts, and all other contracts concluded between doctors or any health professionals, both with regard to the spatial limitation, for which the environment of the place of practice, the population basin and the specialty of the co-contractors must be taken into account, and with regard to the duration of the limitation, which must take into account, among other things, the duration of the contract.

 

Health Law