Indiana to Further Restrict Physician Non-Competes

May 4, 2023 | Insights

This article, originally published on May 1, 2023, has been revised after Governor Eric J. Holcomb signed the bill into law.

By Michael A. Drab

Governor Holcomb signed Senate Bill 7 into law on May 4, 2023, and the amendment will take effect on July 1, 2023. This article summaries how the amended statute will impact Indiana physicians and providers.

Impacts on Physicians and Providers

On April 25, 2023, the Indiana Senate passed an amendment banning non-compete agreements with primary care physicians (defined as physicians practicing family medicine, general pediatric medicine, and internal medicine) executed on or after July 1, 2023. The current version, originally introduced as an outright ban, represents a series of compromises between the Indiana House and Indiana Senate. Governor Eric Holcomb is expected to sign the bill into law.

In addition to categorically banning non-compete agreements with primary care physicians, the bill significantly narrows the enforceability of non-competes with physicians practicing in other areas. Non-compete agreements with any physician will be unenforceable if the employer terminates the physician without cause, the physician terminates employment for cause, or the physician’s employment contract expires and both parties have fulfilled their contractual obligations.

The amendment comes only three years after Indiana passed a previous law placing greater restrictions on physician non-competes. The 2020 legislation prohibited physician non-competes unless the agreement contained a buy-out provision, ensured accessibility to patient medical records, and had provisions protecting patient preferences. In addition to expanding restrictions on physician non-competes, the new law provides some clarity regarding buy-out provisions.

Assuming the bill is signed into law, employers and physicians in Indiana wondering whether a particular non-compete agreement is enforceable will need to pay special attention to the date on which the agreement was executed. Agreements executed prior to July 1, 2020, will be analyzed under Indiana common law. Agreements executed between July 1, 2020, and July 1, 2023, will be analyzed under the 2020 law, and agreements executed after July 1, 2023, will be analyzed under the amended statute.

Indiana’s Senate Enrolled Act No. 7 is but one more data point in the rising national criticism of non-compete agreements and falls closely on the heels of the FTC’s recent proposal to ban non-compete agreements nationwide.

The opinions expressed are those of the authors and do not necessarily reflect the views of the firm, its clients, or any of its or their respective affiliates. This article is for informational purposes only and does not constitute legal advice. For more information on this amendment passed by the Indiana senate banning non-compete agreements for primary care physicians, please contact Michael A. Drab or a member of the Labor and Employment practice.

Meet Michael

Michael A. Drab is an attorney in the Labor & Employment section of Jackson Walker’s Houston office. His practice focuses on resolving disputes for employers and businesses. Prior to joining the Firm, Michael served as a judicial law clerk to the Honorable Andrew M. Edison in the Southern District of Texas.