In March of this year, Arkansas Governor Sarah Huckabee signed into law a bill titled “An Act To Clarify That a Covenant Not to Compete Agreement Is Unenforceable for Certain Licensed Medical Professionals" (the “Act”).
The Act amends Arkansas’s statute governing noncompete agreements to clarify that any noncompete that “restricts the right of a physician to practice within the physician’s scope of practice is void.”
The Act is set to take effect 90 days after the conclusion of the current legislative session, so it is anticipated that the Act will take effect on or about July 15, 2025. The Act does not state whether it applies prospectively only or whether it will have retroactive effect, and, therefore, invalidate existing physician noncompete agreements.
The Act defines “physician” as any person authorized or licensed to practice medicine under the Arkansas Medical Practices Act or a person authorized to practice osteopathy under Arkansas statute.
Noncompete agreements remain enforceable under Arkansas law if the noncompete is ancillary to an employment relationship or part of an otherwise enforceable employment agreement or contract, provided that (1) the employer has a protectable business interest; and (2) the noncompete is limited with respect to time and scope in a manner that is not greater than necessary to defend the protectable business interest of the employer. Arkansas Code § 4-75-101(a). Arkansas law broadly defines a “protectable business interest” of the employer to include the employer’s: (i) trade secrets; (ii) intellectual property; (iii) customer lists; (iv) goodwill with customers; (v) knowledge of his or her business practices; (vi) methods; (vii) profit margins; (viii) costs; (ix) other confidential business information that is confidential, proprietary, and increases in value from not being known by a competitor; (x) training and education of the employer's employees; and (xi) other valuable employer data that the employer has provided to an employee that an employer would reasonably seek to protect or safeguard from a competitor in the interest of fairness. Arkansas Code § 4-75-101(b).
Arkansas’s noncompete law does not apply to agreements not to solicit, recruit, or hire employees, confidentiality or nondisclosure agreements, and the terms of an employment agreement. These restrictive covenants remain enforceable with physicians as well.
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