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New law limits doctors’ non-compete clauses

ALBUQUERQUE, N.M. — A bill recently signed into law will limit non-compete clauses for doctors and certain other health-care providers, making it easier for them to change employers without having to leave town.

The law, to take effect on July 1, will limit the enforceability of such clauses, allowing physicians to remain in communities where they have developed relationships with patients, while protecting employers who have incurred hiring costs, said Randy Marshall, New Mexico Medical Society executive director.

Under SB 325, sponsored by Sen. Stuart Ingle, R-Portales, non-compete clauses in contracts  for physicians, osteopathic physicians, podiatrists, dentists and certified nurse anesthetists will be enforceable only for the first three years of employment. After that, the health care professionals can seek other positions in the same city or community without restriction.

The law will, however, allow employers to require the employee to repay certain expenses such as signing bonuses and relocation costs related to recruitment.

It does not apply to health care professionals who are shareholders, owners, partners or directors of a health care practice.

Current law allows employers to include provisions in contracts that prevent a provider from leaving a position and going directly to another job in the same area. The provisions are typically used to limit the ability of employees to compete with their employer when they leave. The most common stipulations prohibit a provider from working for a competitor within 50 miles of the previous employer for one year.

“As more physicians are going toward employed positions,” Marshall said “the problem some doctors were having if they signed a non-compete clause, is if they did not like the practice they had to leave the community.”

Marshall said that disrupts patient care and causes hardships for the providers’ families. He cited the city of Hobbs’ loss of seven practitioners within a year because of non-compete clauses, leaving their patients scrambling to find care. He added that several lawsuits have been filed by practitioners in New Mexico over the non-compete issue.

Marshall said the Medical Society worked closely with the New Mexico Hospital Association, University of New Mexico Health Sciences Center and several other large medical groups to reach consensus on the bill’s provisions.