April 29th, 2025
Oregon And Montana Noncompete Bills 2025, And A Few Notes About Restrictive Covenants Affecting Physicians In Washington And California And Montana by Jim W. Vogele
For any reader who may be considering an Oregon physician contract in the future (or perhaps has already signed one), it’s worth noting that, as of April 2025, two proposed bills in the Oregon Legislature would ban or limit noncompete provisions in Oregon healthcare provider and/or physician employment contracts. The “and/or” is because the two bills differ in the scope of providers they may protect from imposition of noncompete restrictive covenants in the State of Oregon. If you are curious, as an Oregon physician or, as I am, an Oregon physician contract review attorney, you can check out summaries of the Oregon physician noncompete bills below.
Likewise, a bill in the 2025 Montana legislature has passed both the House and Senate, and needs only to be signed into law, which will expand the prohibition against restraints on trade from a limited set of physicians (only psychiatrists and addiction medicine physicians) as well as certain other healthcare practitioners and expand this prohibition to all licensed physicians in Montana. This would be a welcome development for those physicians considering Montana physician employment contracts.
- The 2025 Oregon Bills
Oregon Senate Bill 468 would ban noncompetes broadly for medical professionals. By way of defining the individuals to which it would apply, Senate Bill 468 provides:
“A noncompetition agreement entered into between an employer and an employee is void and unenforceable unless . . . . (B) . . .(c) The employee is a person other than a health professional licensed or certified by or registered with a health professional regulatory board . . . .”).
Currently, Senate Bill 468 has been referred to the Senate Judiciary Committee and has not yet proceeded to a vote.
Senate Bill 957 is narrower in scope and would apply only to those providers licensed by the Oregon Medical Board, i.e. Oregon physicians. But on the encouraging side, on April 1, 2025, SB 957 passed the Senate by a 22 to 2 vote (a strong senatorial endorsement of the bill). By way of defining the individuals to which it would apply, Senate Bill 957 provides:
“(a) ‘Licensee’ means an individual holding a valid license issued by the Oregon Medical Board . . . (2)(a) Notwithstanding ORS 653.295 (1) and (2), and except as provided in paragraph (b) of this subsection, a noncompetition agreement between a licensee and another person is void and unenforceable.”
The exception proposed in subsection paragraph (b) provides that a noncompetition agreement is valid only as to physicians with an equity ownership position. To meet the equity ownership exemption from the potential noncompetition ban, the agreement must, first, comply with the terms of Oregon’s long-standing general noncompetition statute, ORS 653.295, and, second, the agreement must be a contract between “a licensee and a business entity; (A) For which the licensee provides direct patient care services; and (B) In which the licensee controls an ownership interest that is equivalent to at least five percent of the entire ownership interest that exists in the business entity.” (emphasis added).
Significantly, should Senate Bill 957 be approved by the Oregon House, and signed into law, it could be applicable retroactively as follows: “SECTION 2. A noncompetition agreement, as defined in section 1 of this 2025 Act, into which a licensee, as defined in section 1 of this 2025 Act, enters before, on or after the effective date of this 2025 Act may not be enforced.” (emphasis added).
The potential implications of a retroactive application of the Act are obviously important. Stay tuned. The road to passage of Senate Bill 957 is far from clear; but there is hope, for physicians licensed by the Oregon Medical Board, that noncompetes may finally be a major headache they won’t have to worry about unless they have an ownership interest that will meet the 5% equity standard of the statute IF the statute is passed.
A series of public hearings have been scheduled by the Oregon House for the first week in May 2025. https://gov.oregonlive.com/bill/2025/SB957/
Cautionary notes
“The wheels of justice turn slowly . . . .” is part of an ancient proverb or metaphor. Yet it remains true today. Hence, a couple of cautionary words are appropriate as mentioned below.
First, be careful as you source the information you receive regarding matters such as restrictive covenants. Over the past year, I have heard from quite a number of physician contract review clients, particularly with respect to Oregon physician contract reviews and Washington physician contract reviews, that noncompete agreements are no longer enforceable due to Federal Trade Commission (“FTC”) actions. Not true. Yes, the FTC attempted to ban noncompetes nationwide (and even then, keep in mind that the ban probably would not have applied to not-for-profit organizations, for which many physicians work). But this ban was challenged in several federal courts and it appears at this juncture, in April 2025 that the FTC ban will either never become effective (most likely scenario) or only at a future time that is a little difficult to imagine at this point.
Second, be careful as you source the information you receive . . . . yes, I’m repeating myself; but I reiterate here because I recently saw a self-described authoritative source regarding physician contracts describe noncompete laws in a jurisdiction that I know very well and the information provided was wrong; the information was based on the law as it formerly was in this jurisdiction at least 4 years ago or more (the relevant statute has been amended).
An aside on all forms of intelligence, including artificial
Most of you likely do this instinctively now, but checking several sources regarding any important issue is always well-advised, including being careful to consult the dates of publication of any articles or announcements you may be reading. Obviously, governmental sources are more likely to be authoritative, but no source is perfect (to say the least).
All of this involves a little searching of course. If not a little soul searching. Which leads me to ponder for just a moment the subject of large language models (“LLMs”). We don’t know the full impact of the AI tool writ large, but it will be impactful. I have no interest in competing with AI, because I daresay in many areas AI will win. Hands down. I heard recently in a continuing legal education course that AI may be ‘better’ at contract reviews than humans. And less expensive. Well, if you want to obtain my insights on that – or on a physician employment contract – you’d have to talk to me, indeed you’d have to retain my services to provide a contract review. For now, I’m happy to say that AI will be a useful tool, I expect.
As someone who has used the basic computerized legal research tools – Boolean searching – that have been available for decades, these research tools are a window into AI potential even though the basic searches most of us have been conducting for years are not AI-enabled. The basic Boolean process allows you to make use of existing information and groups of words by compiling, filing, and application of logic in conducting searches to answer problems or provide insight on legal questions; the searching is largely conducted within collections of legal decisions by appellate courts as well as the statutes, laws, and regulations enacted by legislatures and regulatory agencies. It’s all extremely helpful to a practicing attorney or to anyone interested in gaining knowledge and information, whether in their work or for simple edification or amusement. I expect AI will be a fairly extreme and far-reaching extension of that when it comes to the law, doing many things in essence automatically that used to require mental work by a human being (which will still be required in some respect, e.g. in identifying and articulating questions based on facts of a case or business transaction or other issue). Whether AI is ‘better’ at something than another approach thus to me seems to be a question that sort misses the point. Of course AI will be better at certain things. Would I rather deal with a machine or a person concerning matters of importance? My response would probably be that I’ll choose the person, who makes use of machines as needed and where helpful.
In any event, my practice is limited to providing physician contract reviews and legal advice only in the four jurisdictions where I am admitted to practice law (and thus could appear in court, in person wearing my suit and tie, and legally represent a client – this is not something I’m doing much of these days, having done an awful lot of it in the past; but it’s something I mention here just for emphasis. Thus, when it comes to physician employment contracts, I provide only Washington physician contract reviews, California physician contract reviews, Montana physician contract reviews, and Oregon physician contract reviews, because those jurisdictions are where I can practice law.
Part of the ethical obligation I have as an attorney (besides practicing only in jurisdictions where I am licensed to do so) is to stay informed about the laws in each of these jurisdictions, including changes that take effect over the years. I take this obligation very seriously, as I must.
Further and foremost, when I provide legal advice, I do so only if I know the correct answer to a question/issue. And by “correct,” this means that if the answer to a question/issue is unclear, then I explain why this is the case and present an analysis of the risks associated with a lack of clarity when it comes to physician employment contracts. And just as importantly, if I do not know the answer to a question, I say that I do not know! I can offer to research the answer, if it is amenable to research. But I do not ‘wing-it.’ Most of my clients appreciate this approach. I also stay in my lane when it comes to the scope of my practice. When I state that a matter is outside my scope of practice, I often receive expressions of gratitude concerning “your candor.” I think physicians appreciate candor (who doesn’t?) perhaps as much as any professionals do. Regardless, candor is the least you can expect of an attorney providing advice on your healthcare provider employment contract. I would rather practice law with candor, and ethically, than make money. Period. Furthermore, in many circumstances, if the legal advice you need is outside my scope of practice, I’ll be able to provide an appropriate referral.
So to sum up this little aside – in my view, an experienced attorney is a sort of home-made and very human large language model. We employ all that we have learned through education and experience, in some cases many years of experience, along with as much research and due diligence as is needed, and then combine this with our time and effort in engaging with and thinking about issues and problems, and we proceed accordingly in providing advice (in my case, analyzing contracts) and/or representing our clients. I sum, I believe my wife would say that ‘large language’ is something I’ve long been engaged in (albeit not in the sense of AI), sometimes to her eventual annoyance on some occasions! I’m rarely accused of a reticence to use the English language in large ways.
- The 2025 Montana Bill
Noting here an important potential development in Montana law as of April 2025: HB 620 has passed both the Montana House (March 7, 2025) and the Montana Senate (April 11, 2025), and, if signed into law, will amend Montana law, at MCA 78-2-724 (effective May 8, 2023). The statute currently prohibits noncompete agreements for only certain healthcare practitioners, including, Montana-licensed:
- psychiatrists and addiction medicine physicians;
- psychologists;
- social workers;
- professional counselors;
- addiction counselors;
- marriage and family therapists; and
- behavioral health peer support specialists.
But previously the statute has not prohibited noncompetes for physicians generally. If the new law is signed and enacted into law, it will expand the prohibition against noncompetes in Montana to include all physicians, effectively banning noncompetes for physicians in the state.
https://fastdemocracy.com/bill-search/mt/2025/bills/MTB00016504/?report-bill-view=1
One other Montana legal note here is to observe a very recent decision, issued April 9, 2025 by the U.S. District Court for the District of Montana, which contains an extensive analysis of both choice of law and restraints on trade under Montana law, concluding among other things that the noncompetition provision of the employment agreement at issue in that case was an unreasonable restraint on trade and therefore unenforceable. See Jonathan Cushman CPA LLC v. Babcock. (D.Mont. 2025).
https://www.govinfo.gov/content/pkg/USCOURTS-mtd-9_24-cv-00065/pdf/USCOURTS-mtd-9_24-cv-00065-3.pdf
The Court’s reasoning in Babcock is based on a close review, of course, of the contract language as well as the noncompete precedent of the Montana Supreme Court. Under Montana law, a restriction on trade, such as a noncompete, may be enforceable if it is partial or restricted with respect to either time or place; it must be based on good consideration; and it must be reasonable, extending only so far as necessary to providing fair protection to its proponent. That is the common law approach in Montana.
III. Recent Washington Restrictive Covenant Developments
In Washington, a new amendment effective June 6, 2024 states that the definition of a noncompete includes “an agreement that directly or indirectly prohibits the acceptance or transaction of business with a customer.” RCW 49.62.010. This amendment is significant in Washington, but also in Oregon because the accept or transact business exception to the limitations on noncompetition agreements, currently a part of Oregon law, at ORS 653.295(5)(b), is a major problem. One could go so far as to say it is a ‘glitch’ in Oregon law. The full text of (5)(b) is: “(5) Subsections (1) and (3) [limitations on noncompetes] do not apply to: . . . (b) A covenant not to solicit employees of the employer or solicit or transact business with customers of the employer.”
Obviously, actively soliciting employees or customers of your former employer is one thing; but simply “transact[ing] business with customers” is entirely different. In the former situation, the ex-employee has control over whether the employee is actually soliciting employees or customers; in the latter, the former employee could literally have to turn away unsolicited customers, which, in the case of physicians, could mean turning away patients who need medical services pursuant to this language. That should not be allowed, assuming (1) the patient has initiated the request for services, (2) has provided any necessary release of records so that records can be transferred or shared with the new treating physician, and (3) the new physician is willing to accept the patient. Against, I am referring to a patient who has initiated this transfer of medical care, unsolicited by the new physician the patient has chosen to provide that care.
Washington has now redressed this aspect of the problem with overbroad nonsolicitation definitions. One hopes that Oregon will do the same, one way or another, when it comes to healthcare practitioners – pursuant to the bills mentioned above, or by amending ORS 653.295(5)(b) as it generally applies to Oregon employees. Meanwhile, by narrowing its definition of nonsolicitation provisions, Washington has wisely addressed a problem that previously created a potentially gaping exception, where a more narrow exception applicable to actual nonsolicitation provisions would have been appropriate.
Another aspect of Washington noncompetition law that Oregon would be wise to follow is Washington’s enactment of 49.62.020(1)(c ) providing that “If the employee is terminated as a result of a layoff” a noncompete cannot be enforced unless the employer pays the equivalent of the employee’s base salary minus income received from subsequent employment during the period the noncompete is enforced. This is a wise caveat (although it would have been better had the Washington legislature defined “layoff” which will be left to the courts and/or subsequent amendment for clarification). Oregon law would be well-served if Oregon were to enact a similar amendment, unless noncompetes are simply banned in toto.
- California developments concerns restraints on trade
In California, physician contracts clearly should not include noncompete provisions. Thus, California should certainly be the most straightforward of the west coast jurisdictions to address when it comes to developments in the area of noncompetition agreements. This is because, as you likely know, noncompetes applicable to employees are simply not enforceable under Cal.Bus.&Prof. Code 16600.
A more recent (albeit from 2024 not 2025) is the current version of Cal.Lab.&Prof. Code 16600.5 (effective Jan. 1, 2024). There has been some early litigation involving out-of-state employers and/or out-of-state employees and the applicability of that statute, which provides that noncompetes are not enforceable in California no matter where or when signed. One point that is clear is that both California employers and employers outside California should use only California-compliant restrictive covenants for California employees. These covenants cannot, of course, be noncompetes and should also not include nonsolicitation provisions as to customers (as these do not comply with California law). However, employers can use properly-tailored trade secret and confidentiality provisions.
A final word here on California nonsolicitation agreements that purport to prohibit solicitation of customers – unless they are proper tailored to restrain only the use of trade secrets, they are not legal under California law. The California Court of Appeals as said as much:
3) Based on the foregoing it is clear that the noncompete and nonsolicitation clauses in the agreements with Dowell and Chapman are void and unenforceable under section 16600 and that their use violates section 17200. The broadly worded noncompete clause prevents Dowell and Chapman, for a period of 18 months after termination of employment with Biosense, from rendering services, directly or indirectly, to any competitor in which the services they may provide could enhance the use or marketability of a conflicting product by application of confidential information to which the employees had access during employment. Similarly, the broadly worded nonsolicitation clause prevents the employees for a period of 18 months postemployment from soliciting any business from, selling to, or rendering any service directly or indirectly to any of the accounts, customers or clients with whom they had contact during their last 12 months of employment. Ultimately, these provisions restrain the employees from practicing their chosen profession. Indeed, these clauses are similar to those found to be void under section 16600. (See, e.g., D’Sa, supra, 85 Cal.App.4th at p. 931; Kolani v. Gluska (1998) 64 Cal.App.4th 402, 407 [75 Cal. Rptr. 2d 257]; Metro Traffic Control, Inc. v. Shadow Traffic Network (1994) 22 Cal.App.4th 853, 860 [27 Cal. Rptr. 2d 573] (Metro Traffic).)
Dowell v. Biosense Webster, Inc., 179 Cal. App. 4th 564, 575 (2009).
https://opencasebook.org/documents/1638/
I remain surprised at the frequency with which I see questionable – at best – nonsolicitation provisions in California physician contracts. There remains a bit of an open question (or split in authority) at present in California on the enforceability of nonsolicitation of employee provisions. But the law seems clear when it comes to nonsolicitation of customer provisions and those are not enforceable under California law. For advice on restrictive covenants in California, you should consult with a California employment law attorney.
Conclusion
As any physician or other healthcare practitioner who has had career options limited due to a noncompete provision can attest, noncompetes are extremely undesirable in an Oregon physician contract. The same goes for Washington physician contracts and Montana physician contracts. Fortunately for California physicians, noncompetes are not legal or enforceable against any employees in California, whether healthcare professionals or otherwise; for this reason, I almost never see a noncompete in a California physician contract (though I do still see nonsolicits in these contracts which are also not permissible in California). But in three of the four jurisdictions where I practice, noncompetes in physician contracts remain a potential headache. As discussed above, recent legislative action in both Oregon and Montana may change this state of affairs.
I am always happy to help with advice and to provide Oregon physician contract reviews, as well as Washington, Montana, and California physician contract reviews.
Happy spring!
