How Non-Compete Provisions Impact Workplace Options: A Congressional Hearing Sheds Light on the Shadows Cast by Restrictive Covenants

Appearing before the U.S. Senate Banking, Housing, and Urban Affairs Subcommittee on Economic Policy at the end of July, Dr. R. James Toussaint, a physician member of the Coalition for Patient-Centered Care, described his experience with a non-compete agreement, including its consequences for his career. Workplace disputes over restrictive covenants, the doctor’s testimony demonstrates, do not always require formal court adjudication, even if one party does threaten to initiate legal proceedings.   

In 2014, Toussaint, an orthopedic surgeon, “joined a private practice group in north central Florida as their only foot-and-ankle-trained orthopedic surgeon.” He described himself as one of “only two surgeons with this expertise across a dozen mostly rural counties serving over 850,000 people.”

For the next several years, Toussaint’s medical practice struggled with a number of funding challenges.  In 2017, it sought capital from a private equity firm based in California. As part of the resulting investment transaction, Toussaint and his partners signed non-competition agreements. 

Under his contract, the doctor “was restricted from practicing orthopedic surgery within  25 miles of any facility in which the [investor] group was currently providing medical services; any facility in which the [investor] group had previously provided medical services; any facility in which the [investor] group was targeted for expansion within the entire State of Florida, and any facility the [investor] group was in discussions with related to a potential acquisition. This noncompete was valid for 2 years, and, of course, the group was located in multiple States.”

Why did Dr. Toussiant agree to a noncompetition agreement?  After spending “hundreds of thousands of dollars in transaction expenses related to the acquisition” by the private equity firm, he and his colleagues “felt backed into a corner and believed that our only choice was to proceed with the transaction in good faith.”

The private equity capital injection did not go as planned and patient care suffered. Consequently, Toussiant resigned to work at a nearby nonprofit public institution. 

Within days of his departure, “the private equity group threatened legal action to prevent [Toussiant] from entering academic practice.”

Despite a Florida statute that essentially negated his noncompete agreement, “the private equity [company’s] goals were clear–to wage a prolonged legal battle in the hopes that [Toussiant] would give up . . . .”.  

A 4-month struggle over Toussiant’s non-competition-related agreement ensued.  Ultimately, he and the medical practice reached a settlement that allowed the doctor to join the university.   

Concluding his remarks, Toussiant alluded to the “negative consequences that noncompete agreements have on patients, the physicians, and their communities.”

Did you sign a noncompete agreement against your better judgement? Are you planning to depart from your workplace?