August 9, 2024 – Following the recent national trend of restrictions on employee non-compete agreements, Louisiana Governor Jeff Landry signed Act 273 into law on May 23, 2024. This law, which becomes effective on January 1, 2025, restricts the permissible scope of non-compete agreements for physicians in Louisiana.

Legislation targeting non-compete agreements typically takes aim at two components of such agreements: duration and geographic scope. For instance, Louisiana’s existing law on employee non-compete agreements, which is not specific to physicians, limits their duration to a maximum of two years from the employee’s separation date and their geographic scope to any named parishes where the employer carries on a similar business. (La. R.S. 23:921).

Act 273 maintains the restriction that a physician’s non-compete agreement cannot extend further than two years from the physician’s separation date. However, it adds that the total duration of such an agreement is limited to three years from the signature of such an agreement for primary care physicians – defined as one who practices general family medicine, general internal medicine, general pediatrics, general obstetrics, or general gynecology – and five years for all other physicians.

The three- or five-year period begins from the effective date of the initial non-compete agreement. Notably, Act 273 further states that any subsequent contract between the physician and the employer cannot contain non-compete provisions. In effect, then, any physician who signs a non-compete agreement at the commencement of their employment and remains employed for either three or five years (depending on the nature of their practice) will not be bound by a non-compete provision following their separation.

In addition, Act 273 restricts the permissible geographic scope of physician non-compete agreements to the parish where the physician’s principal practice is located and no more than two contiguous parishes in which the employer carries on a similar business.

Act 273 also contains two exceptions. It does not apply to any physician employed by or under contract with a rural hospital as defined under the Rural Hospital Preservation Act, R.S. 40:1189.1, or to any physician employed by or under contract with a federally qualified healthcare center (as defined in R.S. 40:1183.3) that operates in a rural parish as was designated by the federal Office of Management and Budget at the time the physician was hired.

If you have any questions about this statute or employee non-compete agreements generally, please contact your Kullman attorney.