Lack of Buy-Out Provision Kills Physician Noncompete Agreement

January 10, 2014 / By Robert Wood

The Texas statute governing noncompete agreements contains specific requirements that must be met for a physician noncompete agreement to be enforceable.  One such requirement is that the agreement must contain a provision allowing the physician to "buy out" of the noncompete if he or she wishes to do so.

In a recent case from the Houston Court of Appeals, the employer found out the hard way the impact of not having a buyout provision in a physician noncompete agreement.  In the case, an ophthalmologist who worked for a Lasik clinic in Houston left the clinic and started a competing clinic nearby.  The ophthalmologist’s former employer sued him for violating his noncompete agreement.

However, the noncompete agreement did not contain a provision allowing the ophthalmologist to buy out of the covenant.  On this basis, the trial court denied the employer’s request for temporary injunction.

On appeal, the employer argued that the trial court should have reformed the agreement by adding a buy-out provision.  The Court of Appeals rejected this contention.  In doing so, the court noted that the statutory language authorizing the parties to allow an arbitrator to establish the price of the buyout does not allow an arbitrator to create a buyout provision where one does not exist.

Thus, the trial court’s refusal to grant a temporary injunction was affirmed.

Complying with the statutory requirements for a noncompete agreement is essential.  This is especially true in the context of physician noncompete agreements, as this case illustrates.

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About the Author

Robert Wood has been a Texas trial lawyer since 1993. During that time, he has represented small, mid-sized, and Fortune 100 companies in business and employment litigation matters all over Texas and the United States. He has also advised and represented hundreds of individuals in employment litigation matters. Read more about Robert Wood