Does a non-compete still hold up if the professional resigns from their position? If you have taken a job and they’ve likely had you sign an employment contract, in that employment contract, if you’re in healthcare or sales, it likely will have some non-compete clause. A non-compete is a restrictive covenant that stops you from doing something either during or after the contract is terminated. If you have signed the employment agreement, it will also have language about how the contract can be terminated—four ways to terminate.
Four Ways to Terminate a Contract
One, the initial term ends, and there’s no renewal language, meaning you signed through your agreement. There’s nothing in there that it automatically renews. Neither party wants to move beyond the three years. The contract ends, that’s it. Terminate a contract by mutual agreement. Any contract can be terminated by both sides and wants to end it. So, that’s another way.
Another way would be with-cause, meaning one of the parties breached the contract, and they’ve likely been given some time to cure the agreement or the breach of the agreement, meaning it’s like a time to fix whatever the problem is. If they fail to do that, the other party can terminate the agreement immediately. And then this is the important one, without-cause termination. And that means either party can terminate the agreement at any time, for any reason, with a certain amount of notice to the other party.
Most contracts are between 30 to 90 days notice, depending on your industry. If you’re in sales, you will be on the low end. If you’re in healthcare and a physician, 60 to 90 is normal to assist with continuity of care issues. Once you resign, it means you have terminated the contract without-cause. So, as I stated before, you will have to provide written notice to your employer, and you will have to work for whatever notice requirement period is in the contract unless both parties agree to something less than that. And there’s almost no scenario where if the employee terminates the contract without-cause that, the non-compete would be somehow invalidated. That would almost make a non-compete never enforceable because 9 out of 10 times, a contract is terminated by the employee giving without-cause notice.
Application of Non-Compete Clause
If the professional is the one that decides to terminate the contract without-cause, the non-compete is still going to apply. The only scenario where there may be language that states it won’t use would be if the employee terminates the contract with-cause, meaning the employer has violated some part of the contract, they’re in breach of contract, and they don’t cure the breach. And then the employee will then terminate the agreement immediately. And often, the non-compete will have language that if the employee terminates the contract with-cause, the non-compete will apply.
Now, ending a contract with the cause is not resigning. Resigning, how it’s generally accepted, would be giving without-cause termination notice. In short, if you do ultimately leave, the non-compete will likely still apply, and you will have to deal with the restrictions of that non-compete. The only scenario where the non-compete wouldn’t apply will be if you terminate the contract with a cause or sometimes if the employer terminates the contract without-cause. Meaning lays you off not because you do anything wrong. The non-compete won’t apply in that scenario.
What Should Be in an Employment Contract About Non-Compete?
Now, I would suggest if you’re offered a non-compete and that language is not in there, you need to add it. So, add those two things. One that the non-compete should not apply if the professional terminates the contract with-cause or the employer terminates the contract without-cause. Those two things can protect the employee from having a non-compete apply to them in every scenario where an employment relationship would end.
Other Blogs of Interest
- Can a Company Make You Sign a Non-Compete After Employment? | Employees Noncompete
- How Much Does it Cost to Fight a Non Compete? | Non Competition
- Should You Tell a Future Employer About a Non Compete?
Can an Employee Refuse to Sign a Non-Compete? | Employees Non-Compete
Can an employee refuse to sign a non-compete? If you’re a professional, it’s very likely the employer will make you sign an employment agreement or perhaps an independent contractor agreement. And most of the time, a non-compete will be included in the employment agreement. A non-compete is a restrictive covenant, and a restrictive covenant essentially stops the employee from doing something either during or after the employment relationship has been terminated. Suppose a professional has been presented with an employment agreement containing an amount of non-compete. In that case, the potential employee can undoubtedly say, I’m not going to sign the non-compete if you want me to be a part of this company. And then, the company can tell you that unless you sign the non-compete, we will not offer you the position.
So, it’s a matter of negotiation and leverage. Most employers will not say, fine, you don’t have to sign a non-compete unless the employee is going to give something up. It is standard in the healthcare profession, sales, and other industries to have a non-compete. It’s just a standard part of being a professional. So, because your employer is asking you to sign an employment agreement containing a non-compete, they’re not out to get you. It’s just a normal part of doing business. Now, another question is whether that non-compete is reasonable or even enforceable or not. There are a few states where non-competes are entirely unenforceable. First, you need to check and see if your state is one of those. And then next, any state will take a reasonableness standard in determining whether the non-compete is enforceable.
Is Non-Compete Enforceable or Reasonable in your State?
So, they’re going to say, alright, what is the scope? Meaning, what is the non-compete stopping you from doing? And then how long does it last? And then what is the geographic restriction? Like, how far? What is the territory where you cannot continue doing what you are doing for that employer? There will be a point for many of the people I assist with contract review where they say.
Because of the situation that they’re in, meaning they’re in a city that they grew up in, that they have family in, their kids go to school there. There’s no scenario where they would be able to move away from the city. The non-compete can be an absolute deal breaker. And others are moving to the city specifically for the job. They have no ties to the town, and they could care less if they have to move away after the contract ends.
Scenario Where the Non-Competition is Important
And so, in the first scenario where the non-compete is extremely important, as I said before, it can be a complete deal breaker. They can say, look, I’m not signing a contract with a non-compete. And most of the time, the employer will say, well, we’re going to find somebody else. Whereas it could be someone who could care less about the non-compete, it’s not even an issue. So, can the employer force the employee to sign a non-compete? Absolutely. They can make it a part of the employment contract.
And obviously, the employee will have to sign the employment contract before they start. But it certainly is up to the employee whether to sign it or not. If you’ve signed the non-compete, you must be willing to live up to and deal with that non-compete. I mean, many times, I get calls from people who have signed an employment agreement that contains a non-compete. Then after the contract terminates, they say, oh my God, this is such a terrible non-compete.
How to Get out of a Terrible Non-Compete From a Former Employer?
How do I get out of it? Well, it isn’t easy. If it’s in a state where they’re entirely enforceable, that’s easy. We can work out a deal with the employer, and almost always, it’s an amount the employee has to pay to get out of the non-compete. Or if it’s considered unreasonable in some respects, meaning, as I said before, it’s too long. It restricts too large of a territory. The scope of it is like, let’s say you’re in software sales, and then the non-compete thinks you can’t make sales anywhere in any industry for a period. Well, that probably would not be enforceable. It should be specific to what you’re doing for the employer.
And let’s take a physician, for example. Maybe you’re in internal medicine, and you could be a hospitalist. You could be doing urgent care, ER, or primary care. Well, suppose you’re a hospitalist for an employer. In that case, you should be able to do those other things, not just stop you from practicing medicine. So, you want to ensure it’s specific to your scope in that particular employer. Well, that is a little breakdown of whether an employee must sign the non-compete or what are some ways to get around it.
What Are Non-Compete Agreements? | Noncompete Agreements
If you are a healthcare professional about to take on a new job, you may be wondering about non-compete agreements. What are they? Who needs them? What should you look out for when signing one?
While non-competes may seem like overly severe restrictions to most people, you need to abide if your state enforces them. This then forces every worker to seek to understand non-compete agreements. Here is everything you need to know about non-compete agreements.
Employer vs. Employees: What Are Non-Compete Agreements?
A non-compete agreement is a contract between an employer and employee in which the employee agrees not to compete with the employer during or after employment within a particular geographic area for a specific period. Non-competes are usually signed when an employee first starts working for a company, but they can also be signed later. Noncompete agreements are also known as a covenant not to compete, restrictive covenants, or non-competition clauses.
Before signing a non-compete agreement, it is important to review the clause thoroughly with the help of a physician contract lawyer. This is primarily because non-compete restrictions can have significant impacts on your career. For example, it can prevent you from getting a job in your field within a specific radius for years if you leave your position- which may happen due to unavoidable circumstances.
How Does a Non-Compete Employment Agreement Work?
Noncompete agreements are most common in fields where there is a lot of competition, such as sales, marketing, and technology. They are also common in industries where employers want to protect their trade secrets or other confidential information.
In the field of medicine, a non-compete is often used to prevent physicians from leaving their jobs and opening up a competing practice nearby. Non compete can also be used to prevent:
- Nurses from starting a competing home health care business
- Pharmaceutical sales representatives from going to work for a competitor
- A veterinarian from opening up a competing animal hospital
- Dentists from opening up a competing dental practice
- Pediatricians from going to work for a competing pediatric practice
What Are the Legalities of Non-Compete Agreements
Non-compete agreements are governed by state law. This means that the terms of a non-compete agreement can vary depending on which state you practice. For example, some states require that non-competes be in writing, while others do not.
State laws require the employer to provide valid consideration, reasonable time frame, geographical scope, and activities to be restrained to have a legally binding agreement. There are also states that don’t make a non-compete enforceable at all. For example, North Dakota, California, and Oklahoma.
What to Look Out For in a Non-Compete Agreement?
When you are reviewing a non-compete agreement, there are a few key things you should look out for:
The Time Period of the Non-Compete
The non compete length should be a reasonable amount of time, such as one to three years. The longer the time frame, the more likely it will affect you if you leave your job.
The Geographical Scope of the Noncompete
The non-compete geographic scope should be limited to the areas where your employer does business. The radius can vary depending on the location where you work. For example, if you practice in rural areas, 15-50 miles could be reasonable. While if you practice in urban areas, 2-15 miles can be considered appropriate.
The activities that are restricted should be clearly defined. They should not be more than what’s needed to protect the employer.
Advantages of a Non-Compete Agreement on Employees
There are some advantages to signing a non-compete agreement, such as:
- You may be able to negotiate a higher salary or other benefits, such as more vacation days. This is due to the consequences that follow if your contract is terminated and you need to get a new job.
- If you do leave your job, you will have a clear understanding of what you can and cannot do. This can prevent you from getting into legal trouble down the road.
- Your employer may be more willing to invest in your training because they know you are less likely to leave the company and use the acquired skills to compete with them.
- Non-compete agreements can give you a sense of job security and stability.
- If you are laid off or fired, you may be entitled to severance pay.
Disadvantages of a Non-Compete Agreement to an Employee
There are also some disadvantages to signing a non-compete agreement, such as:
- It can limit your ability to get another job in your field within a specific region if you are laid off or fired.
- You may be stuck in a job you don’t like because you are afraid of breaching your contract.
- If you do breach your contract, you may be sued by your employer. This can be expensive and time-consuming, even if you win the case.
Note that you don’t have to agree to the non-compete agreement as presented to you by your employer. You should evaluate which parts are critical to you and which parts you’re more flexible with. Next, aim to negotiate on how you and your employer can meet in the middle. Remember, you need a strategy and a reasonable one to do this successfully.
If you are asked to sign a non-compete agreement, it is crucial to make sure that the agreement is fair and reasonable. The reasonableness of a non-compete agreement depends on many factors, such as the duration of the agreement, the geographic scope, and the type of job you have.
Before signing a non-compete agreement, make sure you understand all these terms and conditions. This way, you can protect yourself and your future career. The first step to doing this is by consulting an experienced employment lawyer who can review and advise you on the agreement.
Chelle Law has helped many healthcare workers review and negotiates their non-compete agreements. He would be happy to help you understand your rights and options under the law.
Does a Non-Compete Hold Up if You Are Laid Off?
Does a non-compete still apply if you’re laid off? First, suppose you have a non-compete that applies to you. In that case, you’ve likely signed an employment agreement where the non-compete was part of the restrictive covenants in the employment agreement. Restrictive covenants are things the professional can’t do either during or after the contract is terminated. I’m only going to talk specifically about professionals that have signed employment agreements, including a non-compete.
How to Terminate an Employment Contract?
Within the contract, it will state, one, the term, meaning the length of the agreement, and then two, termination, how to terminate it. Usually, there are four ways to terminate a contract.
Initial Term and Mutual Agreement
One, the initial term can end. So, if you have a three-year contract, the end of the three years is over, and there’s no renewal language in the agreement, that’s it. The non-compete would then apply as soon as the employer terminates the contract. Two, the contract can be terminated by mutual agreement. So, if either party said, you know what, this isn’t working, let’s move on. Once again, whenever that date is, that non-compete would then kick in once that was terminated.
The next one is with-cause, meaning if one party is in breach of contract and fails to secure the breach. Then the other party will have the option to terminate the agreement immediately. Now, there are times when the employer is in breach of contract. They’ll be language in there that states the non-compete won’t apply if the employer is in breach and the agreement is terminated with-cause. If the language isn’t there, I suggest you put it in or ensure it’s in there. That states, once again, if the employer is breaching the contract, fails to, we call that cure the breach, or fix the breach, the non-compete won’t apply.
The last option we’ll talk about the most today is without-cause termination. This means either party can terminate the agreement for any reason, at any time, with a certain amount of notice to the other party. Most people think that being laid off is when the employer terminates the contract without-cause. Both parties can do this with a certain amount of notice. You must make sure that you’re providing the proper notice. If the employer utilizes the without-cause termination agreement, the non-compete will still apply. So, to be clear, even if you’re laid off, which means the employer terminated the contract without-cause, the non-compete will still apply. So, yes, if you are laid off, it’s highly likely that the non-compete will apply.
Three Components of Signed Non-compete
Now, there are a handful of states where non-competes are entirely unenforceable. So, I would check in whatever state you’re in to ensure that a non-competition clause is even enforceable by the courts in that state. And then two, any state will only enforce reasonable non-competes. Meaning it’s specific to what is prohibited, it’s typical to how long it lasts, and then it’s specific to the geographic restriction. And those are the three components of any non-compete, what you specifically can’t do, for how long, within a specific geographic radius. For a physician, let’s say they’re a general surgeon. It’ll state you can’t work as a general surgeon for one year after the contract terminates within 10 miles of your primary practice location.
And then, you can extrapolate that to all the different professions. So, in short, yes, it’s very likely the non-compete will still apply even if you are laid off if you had signed an employment agreement. The employer utilized the without-cause termination option.
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