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General Assembly Fixes Loophole For Health Care Noncompete Agreements

Published by on March 17, 2008

The Virginia General Assembly has attempted to clean up what appeared to be a loophole to allow medical professionals to escape noncompete agreements based on a recent decision by the Supreme Court of Virginia.  The bill was signed by the Governor on March 5, 2008. The bill was intended to clarify that an entity that employs […]

The Virginia General Assembly has attempted to clean up what appeared to be a loophole to allow medical professionals to escape noncompete agreements based on a recent decision by the Supreme Court of Virginia.  The bill was signed by the Governor on March 5, 2008.

The bill was intended to clarify that an entity that employs or contracts with an individual licensed by a health regulatory board may (i) practice or engage in the practice of a profession or occupation for which the individual is licensed, (ii) provide or render professional services related to the profession or occupation for which the person is licensed through the licensed individual, and (iii) enforce the terms of employment or of a contract with the licensed individual.   

The bill was a response to the decision by the Supreme Court of Virginia in Parikh v. Family Care Center, Inc., No. 060934 (2007), which held that a professional corporation did not have a legitimate business interest in preventing a doctor from competing with it because it was not allowed to “practice medicine” under Virginia law.

The text of the relevant provision, which will be included in Section 54.1-111 of the Code of Virginia, reads as follows:

Nothing in this section, nor §§ 13.1-543, 13.1-1102, 54.1-2902, and 54.1-2929, shall be construed to prohibit or prevent any entity of a type listed in § 13.1-542.1 or 13.1-1101.1, which employs or contracts with an individual licensed by a health regulatory board, from (i) practicing or engaging in the practice of a profession or occupation for which such individual is licensed, (ii) providing or rendering professional services related thereto through the licensed individual, or (iii) having a legitimate interest in enforcing the terms of employment or its contract with the licensed individual.

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