How Much Does it Cost to Fight a Non Compete? | Non Competition

How much does it cost to fight a non-compete? This is a juicy topic with many moving parts, but let’s break it down. First, suppose you’ve signed a non-compete. In that case, it’s very likely you’ve signed an employment agreement or perhaps an independent contractor agreement, and a non-compete is considered a restrictive covenant. Restrictive covenants essentially prohibit the professional from doing something during or after the contract ends. So, you’ve signed this, and now you think this is not good for my career. The contract gets terminated, the non-compete kicks in, then you’re saying, alright, what do I do? Let’s break it down into what is considered an enforceable non-compete.

First, there are a handful of states where non-competes are completely unenforceable. This means even if you signed one, it’s not enforceable. I would ensure you’re in a state where non-competes are enforceable as an initial matter. Second, any state where non-competes are enforceable will only enforce it if it’s reasonable. A non-compete has three components. It’ll stop you from doing a specific thing, for a specific amount of time, in a certain geographic radius. Let’s take a doctor, for instance. Let’s say a doctor is a cardiologist. The non-compete would say you can’t work as a cardiologist for a year after the contract terminates within 15 miles of your primary practice location. 

Doctor’s Non-Compete Agreements

So, let’s say a doctor signs a non-compete that lasts three years and is a hundred miles from their primary practice location.

Well, likely, it wouldn’t be enforceable because that is a completely unreasonable amount of time, but you must think about your options. If you’ve signed a contract, you’d have to imagine the employer will attempt to enforce it. So, you need to look at the contract and see what avenues exist if there’s a dispute. One, do you have an arbitration clause in your contract? If you have an arbitration clause in your contract, you essentially give up your rights to litigate. And unless it specifically says anything involving non-compete goes to litigation. And in arbitration, a retired judge or attorney usually hears both sides of the argument and then renders a binding decision. The cost associated with that would be paying the arbitrator, which is usually about a day. And then, assuming you have an attorney, you’d have to pay your attorney’s fees.

And then perhaps if you lost, you’d have to pay the other side’s attorney’s fees, which could easily be thousands and thousands of dollars. Second, if you must litigate, the contract states that any disputes will be filed usually within the county, wherever your practicing is with whatever superior court is there. In that instance, let’s say you get sued. You’d have to hire an attorney; you’d have to pay them, and that’s done hourly. And then, if you lost, you’d have to pay the other party’s reasonable costs and attorney’s fees. And that could be tens of thousands of dollars, maybe even more. It’s unlikely that a non-compete dispute would end up in litigation.

Is Buying Out a Non-Compete Practical?

There would have to be so much money involved, or the non-compete would have to be unreasonable. The professional would think it’s a slam dunk they will win to go after that. Some contracts have buyouts listed, and some states have a specific amount that they consider reasonable. And like for instance, in the healthcare profession, almost any contract with a buyout will state it’s the total compensation you received in the previous 12 months. So, for instance, if you’re, once again, a doctor, you make $250,000 a year, they’re saying you could buy out the non-compete for $250,000. I can tell you there’s almost no financial situation where that would make sense for a doctor to do that. They’ll never make that money at a new job, which would be a very long period.

And they’re not liquid enough to pay the $250,000 all at once. So, fighting a non-compete can cost thousands of dollars, potentially more. You not only would have to pay your attorney’s fees, but if you lost, you’d also have to pay the other side’s attorney’s fees. And then potential damages for violating the non-compete so lost profits from them. Recruitment costs to replace you, and you may have to pay a percentage of what you made in violation of the non-compete. It’s tough. So, I would suggest if you have a contract with a non-compete that you’re interested in breaking or want an analysis of, alright, what’s the likelihood of being able to get out of this? Contact an attorney to go over what’s normal in the state. And then two, if the components of the non-compete, your sign can be attacked in some legal way.

Other Blogs of Interest

• Veterinary Non-Compete Time Limits Explained: Noncompete for Veterinarians
• Is a Non-Compete Enforceable Against a Physician?
• How Many Locations Should a Physician Non-Compete Apply To?
• What Are Restrictive Covenants in a Physician Contract? | Contracts

Can an Employee Refuse to Sign a 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, the employment agreement includes non-compete. 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. 

Determining States With Unenforceable Non-Compete Agreements

There are a few states where non-competes are completely 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.

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 they’re in a city they grew up in. That they have family in, and 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 city, and they could care less if they have to move away after the contract ends. 

Deciding Whether to Sign a Non-Compete

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, and it’s not even an issue. So, can the employer force the employee to sign a non-compete? Absolutely no. 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 do I get out of it? Well, it isn’t easy. Only if it’s in a state where they’re completely 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.

Considering the Scope

The scope of it is like, let’s say you’re in software sales, and then the non-compete says 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 could be a hospitalist,  doing urgent care, ER, or primary care. 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 the scope you’re doing for that specific 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.

Is a 2-Year Non-Compete for a Physician Assistant Reasonable? | PA Noncompete

Is a two-year non-compete reasonable for a physician assistant? Suppose you’re a PA and are about to sign either an employment agreement or many independent contractor agreements. In that case, it will include what’s called restrictive covenants. A restrictive covenant essentially prohibits the PA from doing something either during or after the contract terminates. Normal restrictive covenants would consist of: 

• Non-disparagement clause
• Non-solicitation clause
• Non-compete 

A non-compete prohibits the PA from working within their specialty or as a PA. That is within a specific geographic radius in a particular amount of time. Let’s take each of those components, and then we’ll discuss how long a non-compete should be.

Be Mindful of Specific Details 

It would help if you looked for a few things when it specifies what the PA is prohibited from doing. It’ll say you cannot practice as a physician assistant at all, or you’re working for an orthopedic practice. It may say you can’t work in orthopedics as a physician assistant. This is important because if you build bond to an area, and there’s absolutely no way that you can move after the contract terminates. Then at least you’ll have other opportunities as a PA. Even though you may want to stay in your specialty, at least you would have another opportunity until the non-compete ends. Then you could get back into, in this case, orthopedics if you wanted to. So, it would help if you made sure there’s a language limit to what you do for that specific employer.

Next is the geographic radius. Usually, somewhere between five to 15 miles would be considered reasonable by a court. There are some states, a handful in the United States, where non-competes are completely unenforceable. But for those where it is enforceable, the courts will look at the reasonableness of the non-compete. And then the factors that go into that is, what community is it? 10 miles in New York City could be vastly different than 10 miles in rural North Dakota. You may have zero other opportunities if you’re not working for a practice. It would help if you thought about the setting where I am, and 10 miles, one place could be vastly different than 10 miles and another. Now, regarding how long it should last—most non-competes last between one and two years. Almost no non-compete for a provider over two years would be considered reasonable or enforceable. 

Is 1 Year Non-Compete Reasonable?

If you’re a PA and have a non-compete, you want to get it as close to one year as possible. Most states do not have statutes or laws that specifically address non-compete. There are a handful, but most are based on what is considered reasonable based on past case law. And most courts that then will litigate these non-compete cases will give their opinion on what they would consider a reasonable amount of time. And most judges find that one year or no more than one year would be considered a reasonable amount of time. You rarely find a non-compete that’s less than one year. I mean, a handful I’ve seen that are six months, nine months, and 12 months is the standard.

Employer Concerns

What you want to do is if it’s 24 months, try to negotiate that down to 12 months. That would be a reasonable amount of time for a physician assistant. Now, regarding negotiating a non-compete, you want to do it before signing the contract. Then it would help if you considered how important it is to you. Let’s say you’re from a community, have family, and have kids that go to school. There’s just no chance that you can move after the contract ends. The non-compete could be the vital thing in a contract to determine whether you want to move forward with it or not. Some people move into a community just for a job, have no commitment to a community, and do not care if they must move.

In that scenario, it’s probably not worth negotiating the non-compete. But it could be a deal breaker for some. If you work for a corporate-owned practice, a hospital, or a healthcare network, they often give a take it or leave it non-compete. It’s usually better to leave it if it’s not going to work for you. You’ll have a better chance of negotiating a favorable non-compete with a smaller physician-owned practice. They’re usually more flexible. They can’t use the “well, this policy.” I mean, anyone who says, ” Okay, great, it’s policy. It doesn’t mean you can’t do it; you don’t want to. That is what a reasonable length of time for a non-compete is for a physician assistant.

What Are Non-Compete Agreements? | Noncompete Agreements

If a healthcare professional is about to take on a new job, you may wonder 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 must 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. 

What Are Non-Compete Agreements? 

A non-compete agreement is a contract between an employer and an employee. 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. Still, they can also be signed later on.  

Noncompetes

Non-compete 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. That may happen due to unavoidable circumstances.  

How Does a Non-Compete Agreement Work? 

Non-compete agreements are most common in fields with a lot of competition, such as sales, marketing, and technology. They are common in industries where employers want to protect their trade secrets or other confidential information.  

In medicine, a non-compete prevents physicians from leaving their jobs and opening up a competing practice nearby. A 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 in a Business

State law governs the non-compete agreements. 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 from having a legally binding agreement.  

Some states 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 must be within the areas where your employer does business. The radius can vary depending on the location where you work. For example, 15-50 miles could be reasonable if you practice in rural areas. While if you practice in urban areas, 2-15 miles can be considered appropriate.  

The Activities  

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 to an Employee 

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 if your contract gets terminated and you need to get a new job. 
• If you leave your job, you will clearly understand 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. 
• You may be entitled to severance pay if you are laid off or fired.  

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 get stuck in a job you don’t like because you are afraid of breaching your contract.  
• If you breach your contract, you may get 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. It would help if you evaluated which parts are critical to you and which parts you’re more flexible with. Next, aim to negotiate how you and your employer can meet in the middle. Remember, you need a strategy and a reasonable one to do this successfully. 

Conclusion 

If asked to sign a non-compete agreement, it is crucial to ensure 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, understand all these terms and conditions. This way, you can protect yourself and your future career. The first step is 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.