You spent years building your practice, training your associates, and earning the trust of your patients. So when a physician, dentist, or associate provider walks out the door and opens up two miles away, your first instinct is to reach for the non-compete clause you had them sign. In most states, that clause would protect you. In California, it almost certainly will not, and trying to enforce it can turn you from the plaintiff into the defendant.
This guide explains how a medical practice non-compete in California actually works in 2026, why most restrictive covenants are void, and the legal tools that still protect your practice, your patients, and the goodwill you have worked so hard to build. The rules changed again this year, and two new laws hit medical and dental practices directly.
Why Most Medical Practice Non-Competes Are Void in California
California has rejected employee non-competes since 1872. The rule lives in Business and Professions Code section 16600, which voids any contract that restrains someone from engaging in a lawful profession, trade, or business. For a doctor, that profession is medicine. For a dentist, it is dentistry. A clause that stops them from practicing after they leave you runs straight into the statute.
The California Supreme Court made this nearly absolute in Edwards v. Arthur Andersen LLP (2008) 44 Cal.4th 937. The court rejected the idea that a “reasonable” or “narrow” non-compete could survive. It does not matter if your clause covers only a five-mile radius for only one year. If it restrains a provider from practicing, it is void.
This applies across your clinical staff. Physicians, dentists, nurse practitioners, physician assistants, optometrists, and associate providers all get the same protection. A medical spa cannot lock down its injector. A dental group cannot lock down its associate dentist. A plastic surgery practice cannot lock down a junior surgeon.
The 2024 Laws That Raised the Stakes
For decades, the worst outcome of using a void non-compete was that a court would strike it down. That changed on January 1, 2024, when SB 699 and AB 1076 took effect.
AB 1076 added section 16600.1 and made it unlawful to even include a non-compete in an employment contract. It also forced employers to send written, individualized notice to current and former employees, hired any time after January 1, 2022, telling them their non-compete was void. Failing to send that notice is treated as unfair competition under section 17200, carrying a civil penalty of up to $2,500 per violation. With a full staff, those penalties stack fast.
SB 699 added section 16600.5 and went further. It made it unlawful to attempt to enforce a void non-compete, and it gave the affected provider a private right of action for damages, injunctive relief, and attorney’s fees. Read that again. If you send a cease-and-desist letter to a departing associate based on a void non-compete, that letter alone can hand them a lawsuit against you, with their fees on your tab. Our deeper look at how the state is pursuing these cases is in our breakdown of California’s crackdown on non-compete clauses.
What You Can Still Enforce
The picture is not all bad. California closed the door on employee non-competes, but it left several doors open. These are the tools that actually protect a medical practice owner.
Sale-of-Practice and Buy-In Covenants
The strongest protection you have is tied to ownership, not employment. Section 16601 permits a real non-compete when someone sells a business and its goodwill. If a partner sells their interest in your practice, or you buy out a departing physician owner, you can require a reasonable covenant not to compete in the geographic area the practice serves.
The same logic reaches partnership and entity exits. Section 16602 covers a non-compete tied to the dissolution of a partnership or a partner’s departure. Section 16602.5 covers members leaving a limited liability company. This is where medical practice owners hold real leverage. The moment to lock in a covenant is when a provider buys in as an owner or cashes out as a seller, not when you hand a new associate a stack of onboarding paperwork.
The covenant still has to be reasonable. It must match the territory where the practice actually operates and connect to the goodwill being bought or sold. A covenant that reaches across the entire state when your patients all live within one county invites a challenge.
Trade Secret and Confidentiality Protection
Your patient lists, treatment protocols, pricing models, and referral sources can qualify as trade secrets under the California Uniform Trade Secrets Act, but only if you treat them like secrets. That means restricted access, confidentiality agreements, and real internal controls.
Tread carefully here. In Brown v. TGS Management Co. (2020) 57 Cal.App.5th 303, a California court struck down a confidentiality clause so broad that it functioned like a non-compete. The lesson is simple. You cannot use a confidentiality agreement to do indirectly what section 16600 forbids you to do directly. Protect genuine secrets with narrow, specific language and nothing more.
Patient Non-Solicitation Clauses: Usually Not the Shield You Think
Many practice owners believe that even if they cannot stop a doctor from leaving, they can at least stop that doctor from taking patients. California law has largely closed this path too.
In AMN Healthcare, Inc. v. Aya Healthcare Services, Inc. (2018) 28 Cal.App.5th 923, the court treated an employee non-solicitation clause as a functional non-compete and voided it under section 16600. Courts now apply the same skepticism to clauses that bar a departing provider from soliciting your patients. A patient non-solicitation clause in a California employment agreement is generally unenforceable.
What does this mean in practice? You usually cannot stop a departing physician from announcing their new location, and you cannot stop patients who choose to follow their doctor. Patients have the right to see the provider they trust. The narrow exceptions are the same ones above: a genuine trade secret, or a covenant tied to the sale of the practice.
New for 2026: SB 351 and Private Equity-Backed Practices
If your practice has taken on private equity or hedge fund investment, or operates through a management services organization or dental support organization with corporate backing, SB 351 changes your contracts as of January 1, 2026.
SB 351 voids non-compete and non-disparagement clauses in two kinds of agreements: contracts for the management of a physician or dental practice by a private equity group or hedge fund, and agreements selling practice real estate or assets to those investors. A provider who leaves an investor-backed practice cannot be blocked from practicing elsewhere, and cannot be gagged from speaking out about quality of care, ethics, or the investor’s revenue strategies.
Two carve-outs survive. A genuine sale-of-business non-compete under section 16601 still stands, as long as it does not function as a disguised employee non-compete. A confidentiality clause protecting truly non-public business information also stands, as long as it does not silence a provider on patient care concerns. The California Attorney General enforces SB 351 directly, with injunctions, equitable remedies, and attorney’s fees.
SB 351 also codifies the corporate practice of medicine doctrine, barring investors from controlling clinical decisions. A companion law, AB 1415, expands the state’s pre-transaction review of healthcare deals involving private equity, hedge funds, and MSOs, adding a 90-day notice requirement for material transactions. If an investor sits anywhere in your ownership chart, your management and employment agreements need a fresh review before you rely on any restrictive covenant inside them.
New for 2026: AB 692 and “Stay-or-Pay” Clauses
Practices that cannot use non-competes often turn to financial handcuffs instead. Signing bonuses with clawbacks, relocation repayment, and training or continuing-education repayment agreements all push a provider to stay by making it expensive to leave. California now restricts these too.
AB 692 added section 16608 and took effect January 1, 2026. It bans most “stay-or-pay” provisions, the contract terms that force a worker to repay a debt, training cost, or penalty when their employment ends. A provider subjected to a prohibited clause can sue for the greater of $5,000 or actual damages, plus injunctive relief and attorney’s fees. The law applies to agreements entered on or after January 1, 2026, and is not retroactive.
There are narrow exceptions, and they have strict conditions. Repayment of tuition for a transferable credential can survive if it sits in a separate agreement and meets the statutory rules. A sign-on or retention bonus repayment can survive if it is in a separate agreement, the provider gets at least five business days to consult an attorney, the retention period runs no longer than two years, and the amount is prorated without interest. If your offer letters bundle these terms into the employment contract, they likely fail. Audit them now.
How to Protect Your Practice Without Creating Liability
You can protect your practice in California. You just have to use the tools the law actually allows.
Start by auditing every current employment agreement for void non-compete and patient non-solicitation clauses, and remove them. Confirm you sent the AB 1076 notices, because that obligation is easy to miss and expensive to ignore. Put your real protection where it belongs, in the buy-in and buy-out documents, using section 16601 covenants tied to a true ownership change. Protect genuine trade secrets with narrow, specific agreements rather than sweeping confidentiality language. Rebuild your bonus and repayment structures to fit inside AB 692’s exceptions. If an investor sits in your ownership, review everything against SB 351.
The practices that hold onto their best providers do it through equity, culture, and compensation, not through clauses a court will throw out. Restraint creates liability. Strategy creates retention.
Frequently Asked Questions
Can I stop a doctor who leaves my practice from working nearby?
Generally no. Under Business and Professions Code section 16600, a non-compete that restrains a provider from practicing is void. The main exception is when that provider sold you the practice or their ownership interest, in which case a reasonable covenant under section 16601 may apply.
Are patient non-solicitation clauses enforceable in California?
Usually not. California courts treat patient and customer non-solicitation clauses as functional non-competes and void them under section 16600. Patients have the right to follow the provider they choose.
Can I include a non-compete when a partner buys into or out of my practice?
Yes, within reason. Sections 16601, 16602, and 16602.5 allow covenants tied to the sale of a business, a partnership exit, or an LLC member’s departure. The restriction must be reasonable in geographic scope and connected to the goodwill being transferred.
Does SB 351 apply to my practice?
It applies if a private equity group or hedge fund is involved with your physician or dental practice as an investor, asset owner, or management partner. SB 351 voids non-compete and non-disparagement clauses in those management and asset-sale agreements as of January 1, 2026.
Can I make an associate repay a signing bonus if they leave early?
Only if the repayment term is structured to fit AB 692’s narrow exception. It must sit in a separate agreement, give the provider at least five business days to consult an attorney, cap the retention period at two years, and prorate the amount without interest.
Protect Your Practice the Right Way
California gives departing providers powerful rights, but it also gives practice owners real tools, if you know which clauses hold up and which create liability. The difference between a covenant that protects you and one that hands your former associate a lawsuit often comes down to a few words and the moment you put them in writing.
At the Law Offices of Parag L. Amin, P.C., we help California medical and dental practice owners protect their business, livelihood, and legacy. We audit your agreements, structure enforceable buy-in and sale covenants, and defend you when a provider dispute lands in litigation. We know the medical community in Los Angeles is small, and we treat your matter with the discretion it demands. Learn more about how we serve medical practice owners and dental practice owners, then contact our team for a confidential consultation about protecting your practice.