Florida 2024 2024 Regular Session

Florida Senate Bill S0458 Analysis / Analysis

Filed 01/29/2024

                    The Florida Senate 
BILL ANALYSIS AND FISCAL IMPACT STATEMENT 
(This document is based on the provisions contained in the legislation as of the latest date listed below.) 
Prepared By: The Professional Staff of the Committee on Health Policy  
 
BILL: SB 458 
INTRODUCER:  Senator Brodeur 
SUBJECT:  Invalid Restrictive Covenants in Health Care 
DATE: January 29, 2024 
 
 ANALYST STAFF DIRECTOR  REFERENCE  	ACTION 
1. Looke Brown HP Pre-meeting 
2.     CF  
3.     RC  
 
I. Summary: 
SB 458 amends s. 542.336, F.S., to prohibit any restrictive covenant entered into with an 
allopathic or osteopathic physician which restricts the physician from practicing medicine in any 
geographic area for any period of time after the termination of his or her contract or other 
employment relationship. The bill provides exceptions from the prohibition for restrictive 
covenants related to research, related to physicians whose individual compensation is $160,000 
per year or more, or related to physicians who have or have sold an ownership interest in a 
practice or an affiliate. The bill specifies that its provisions apply to restrictive covenants entered 
into on or after July 1, 2024. 
 
The bill provides an effective date of July 1, 2024. 
II. Present Situation: 
Federal Antitrust Laws 
In 1890, Congress passed the first antitrust law, the Sherman Act, as a comprehensive charter of 
economic liberty aimed at preserving free and unfettered competition as the rule of trade. 
Congress subsequently passed two additional antitrust laws in 1914: the Federal Trade 
Commission Act, which created the Federal Trade Commission (FTC), and the Clayton Act. 
Currently, these are the three core federal antitrust laws.
1
 
 
The Sherman Act 
The Sherman Act outlaws every contract, combination, or conspiracy in restraint of trade, and 
any monopolization, attempted monopolization, or conspiracy or combination to monopolize. 
                                                
1
 See The Antitrust Laws, Federal Trade Commission, available at https://www.ftc.gov/tips-advice/competition-
guidance/guide-antitrust-laws/antitrust-laws (last visited Jan. 26, 2024). 
REVISED:   BILL: SB 458   	Page 2 
 
The Sherman Act does not prohibit every restraint of trade – only those that are unreasonable. 
For example, an agreement between two individuals to form a partnership may restrain trade, but 
may not do so unreasonably, and thus may be lawful under the antitrust laws. In contrast, certain 
acts are considered “per se” violations of the Sherman Act because they are harmful to 
competition. These include plain arrangements among competing individuals or businesses to fix 
prices, divide markets, or rig bids.
2
 
 
The penalties for violating the Sherman Act can be severe. Although most enforcement actions 
are civil, the Sherman Act is also a criminal law, and individuals and businesses that violate it 
may be prosecuted by the U.S. Department of Justice (DOJ). Criminal prosecutions are typically 
limited to intentional and clear violations. The Sherman Act imposes criminal penalties of up to 
$100 million for a corporation and $1 million for an individual, along with up to 10 years in 
prison.
3
 Under some circumstances, the maximum fines can reach twice the gain or loss 
involved.
4
 
 
The Federal Trade Commission Act 
The Federal Trade Commission Act prohibits unfair methods of competition and unfair or 
deceptive acts or practices. The U.S. Supreme Court has ruled that all violations of the Sherman 
Act also violate the FTC Act. Therefore, the FTC can bring cases under the FTC Act against the 
same kinds of activities that violate the Sherman Act. The FTC Act also reaches other practices 
that harm competition but may not fit neatly into categories of conduct formally prohibited by 
the Sherman Act. Only the FTC may bring cases under the FTC Act.
5
 
 
The Clayton Act 
The Clayton Act addresses specific practices that the Sherman Act does not clearly prohibit, such 
as mergers and interlocking directorates.
6
 It also bans mergers and acquisitions where the effect 
may substantially lessen competition or create a monopoly. As amended by the Robinson-
Patman Act of 1936, the Clayton Act also prohibits certain discriminatory prices, services, and 
allowances in dealings between merchants. The Clayton Act was amended again in 1976 by the 
Hart-Scott-Rodino Antitrust Improvements Act to require companies planning large mergers or 
acquisitions to notify the government of their plans in advance. Additionally, private parties are 
authorized to sue for triple damages when they have been harmed by conduct that violates either 
the Sherman or Clayton Act and to obtain a court order prohibiting the anticompetitive practice 
prospectively.
7
 
 
                                                
2
 Id. 
3
 Antitrust Enforcement and the Consumer, U.S. Department of Justice, available at 
https://www.govinfo.gov/content/pkg/GOVPUB-J-PURL-LPS16084/pdf/GOVPUB-J-PURL-LPS16084.pdf (last visited Jan. 
26, 2024).  
4
 Id. 
5
 The Antitrust Laws, Federal Trade Commission, available at https://www.ftc.gov/tips-advice/competition-guidance/guide-
antitrust-laws/antitrust-laws (last visited Jan. 26, 2024). 
6
 “Interlocking directorates” means the same person making business decisions for competing companies. See also Id.  
7
 Id.  BILL: SB 458   	Page 3 
 
Florida Antitrust Laws 
Florida law also provides protections against anticompetitive practices. Chapter 542, F.S., the 
Florida Antitrust Act of 1980, has a stated purpose to complement the body of federal law 
prohibiting restraints of trade or commerce in order to foster effective competition.
8
 It outlaws 
every contract, combination, or conspiracy in restraint of trade or commerce in Florida
9
 and any 
person from monopolizing or attempting or conspiring to monopolize any part of trade.
10
 
 
Contracts in Restraint of Trade or Commerce 
Generally, a contract in restraint of trade or commerce in Florida is unlawful.
11
 However, non-
competition restrictive covenants
12
 contained in employment agreements that are reasonable in 
time, area, and line of business, are not prohibited.
13
 In any action concerning enforcement of a 
restrictive covenant, a court may not enforce a restrictive covenant unless it is set forth in a 
writing signed by the person against whom enforcement is sought, and the person seeking 
enforcement of a restrictive covenant must prove the existence of one or more legitimate 
business interests justifying the restrictive covenant.
14
 The term “legitimate business interest” 
includes, but is not limited to: 
 Trade secrets;
15
 
 Valuable confidential business or professional information that does not otherwise qualify as 
trade secrets; 
 Substantial relationships with specific prospective or existing customers, patients, or clients; 
 Customer, patient, or client goodwill associated with: 
o An ongoing business or professional practice, by way of trade name, trademark, service 
mark, or “trade dress;” 
o A specific geographic location; or 
o A specific marketing or trade area; or 
 Extraordinary or specialized training.
16
 
 
Any restrictive covenant not supported by a legitimate business interest is unlawful and is void 
and unenforceable.
17
 A person seeking enforcement of a restrictive covenant must prove that the 
contractually specified restraint is reasonably necessary to protect the legitimate business interest 
or interests justifying the restriction.
18
 
                                                
8
 Section 542.16, F.S. 
9
 Section 542.18, F.S. 
10
 Section 542.19, F.S. 
11
 Section 542.18, F.S. 
12
 Section 542.335, F.S. employs the term “restrictive covenants” and includes all contractual restrictions such as 
noncompetition/nonsolicitation agreements, confidentiality agreements, exclusive dealing agreements, and all other 
contractual restraints of trade. See Henao v. Prof'l Shoe Repair, Inc., 929 So.2d 723, 726 (Fla. 5th DCA 2006).  
13
 Section 542.335(1), F.S. 
14
 Id.  
15
 Section 688.002(4), F.S., defines a trade secret as information, including a formula, pattern, compilation, program, device, 
method, technique, or process that derives independent economic value, actual or potential, from not being generally known 
to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure 
or use; and is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 
16
 Section 542.335(1)(b), F.S. 
17
 Id.  
18
 Section 542.335(1)(c), F.S.   BILL: SB 458   	Page 4 
 
 
Restrictive Covenants in Florida Health Care 
Under s. 542.336, F.S., a restrictive covenant entered into with a physician who practices a 
medical specialty in a county where one entity employs or contracts with all physicians who 
practice that specialty in that county, is not supported by a legitimate business interest and is 
void and unenforceable.
19
 The restrictive covenant remains void and unenforceable until three 
years after the date on which a second entity that employs or contracts with one or more 
physicians who practice that specialty begins serving patients in that county.
20
 
 
21
st
 Century Oncology, Inc., sought a preliminary injunction to enjoin the application and 
enforcement of this statute. In August of 2019, the U.S. District Court for the Northern District 
of Florida denied the injunction. While s. 542.336, F.S., was found to impair the plaintiff's 
employment contracts within the meaning of the Contracts Clause, the court held that the degree 
of impairment did not outweigh the statute’s significant, legitimate public purpose.
21
 
III. Effect of Proposed Changes: 
SB 458 amends s. 542.336, F.S., to declare that any restrictive covenant entered into with an 
allopathic or osteopathic physician which restricts the physician from practicing medicine in any 
geographic area for any period of time after the termination of his or her contract, partnership, 
employment, independent contractor arrangement, or professional relationship or other 
employment relationship is not supported by a legitimate business interest and is void and 
unenforceable. 
 
The bill provides exceptions from the provisions of the bill described above for restrictive 
covenants that are: 
 Related to any research conducted by the physician under the terms of a contract or in 
furtherance of a partnership, employment, or professional relationship, if the covenant does 
not impair the continuing care and treatment of a specific patient or patients whose care and 
treatment were part of the research; 
 Related to physicians whose individual compensation is $160,000 per year or more. The bill 
defines individual compensation to mean: 
o For an employed physician, the amount of wages, bonuses, benefits, and salary paid to 
the physician for the previous tax year or expected to be paid for the current tax year; or 
o For a physician with a partnership or similar ownership interest in the profits of a 
practice, the amount of business income attributed to the physician for the previous tax 
year or expected to be attributed to the physician for the current tax year; or 
 Related to physicians who have or have sold an ownership interest in a practice or an 
affiliate. 
                                                
19
 Section 542.336, F.S.  
20
 Id.  
21
 “The ostensible public purpose of section 542.336 is to reduce healthcare costs and improve patients' access to physicians. 
See § 542.336, Fla. Stat. (2019); ECF No. 64 at 8 (Attorney General's post-hearing brief, stating “section 542.336 explicitly 
sets forth its own rational basis in declaring that the restrictive covenants addressed by it are not supported by a legitimate 
business interest, restrict patient access to physicians, and increase costs”). It is well settled that access to affordable 
healthcare is a legitimate state interest.” 21st Century Oncology, Inc. v. Moody, 402 F. Supp. 3d 1351, 1359 (N.D. Fla. 
2019).  BILL: SB 458   	Page 5 
 
 
The bill specifies that its provisions apply to restrictive covenants entered into on or after July 1, 
2024. 
 
The bill provides an effective date of July 1, 2024. 
IV. Constitutional Issues: 
A. Municipality/County Mandates Restrictions: 
None. 
B. Public Records/Open Meetings Issues: 
None. 
C. Trust Funds Restrictions: 
None. 
D. State Tax or Fee Increases: 
None. 
E. Other Constitutional Issues: 
None. 
V. Fiscal Impact Statement: 
A. Tax/Fee Issues: 
None. 
B. Private Sector Impact: 
Prohibiting restrictive covenants as provided in the bill may provide patients with more 
access to physicians and decrease health care costs. 
C. Government Sector Impact: 
None. 
VI. Technical Deficiencies: 
None. 
VII. Related Issues: 
None.  BILL: SB 458   	Page 6 
 
VIII. Statutes Affected: 
This bill substantially amends section 542.336 of the Florida Statutes.  
IX. Additional Information: 
A. Committee Substitute – Statement of Changes: 
(Summarizing differences between the Committee Substitute and the prior version of the bill.) 
None. 
B. Amendments: 
None. 
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.