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N.C. Court of Appeals Voids Noncompete With Specialized Physician

    Client Alerts
  • March 25, 2019

In addition to the typical reasonableness argument and other defenses against the enforcement of employment noncompetition covenants, in some cases courts will invalidate these agreements based on a public policy argument. These situations arise most frequently in the medical profession, where a physician argues that his or her inability to provide services in a geographic area deprives patients of a needed medical service. Last week, the North Carolina Court of Appeals applied this principle, voiding a noncompete with an ophthalmologist also trained in plastic surgery.

In Aesthetic Facial & Ocular Plastic Surgery Center v. Zaldivar, the defendant was trained in reconstructive ocular plastic surgery. He left his former practice, which sued to enforce a one-year noncompetition restriction applicable to most of eastern North Carolina. The parties stipulated that only a handful of physicians practice in this specialized area in that part of the state. However, the plaintiff argued that the remaining specialists could adequately cover patient needs in the territory during the restricted period. The trial court disagreed, granting summary judgment to the defendant based on public policy.

The Court of Appeals agreed, affirming this decision. The court concluded that there was no genuine material issue of fact as to the availability of oculofacial plastic surgeons in eastern North Carolina, and that patients unable to obtain these services faced the possibility of losing their eyesight. The Court of Appeals also held that the same public policy principles apply to a covenant that provides for a physician buyout in lieu of a practice prohibition. The requirement that the subject physician pay damages to his former practice raises the same concerns over patient access resulting from this burden. Finally, the court applied the same reasoning to the defendant’s patient non-solicitation covenant.

While the public policy exception will not apply to most physicians, parts of North Carolina remain underserved by certain medical specialties. Medical practices employing physicians in these situations should understand that they may have limited options for restricting competition in the event of a physician departure.