Is a Non-Compete Enforceable Against a Physician? | Physician Non-Compete
Yes, a non-competition clause for a physician is a legally binding clause. It prohibits the physician from working within a defined geographic area for a specific period. For instance, a restriction for a physician from working within their specialty. That is for 1 year within 10 miles from their primary practice location.
What Is a Reasonable Non-Compete?
Most courts find that a non-compete is enforceable if it is reasonable. The general test for reasonableness by a court or arbitrator would be:
- The restraint is not more than required to protect the employer,
- It does not inflict any untold hardships on the employer, and
- The restraint is not harmful to the public.
Some states require a non-competition to include a buy-out. The buy-out amount usually equals one year’s compensation for the physician.
Is a Physician Non-Compete Enforceable in Every State?
No, some states prohibit or severely curtail the restrictions in physician non-competition clauses. Those states where a physician non-compete is currently prohibited or limited include:
- Rhode Island
- New Mexico
Breaking an Agreement With a Noncompete Clause
Physicians with non-competition agreements in their contracts were originally restraints of trade. Thus were invalid on the grounds of public policy at common law. However, many restraints of trade incidents to contracts were upheld based on the rule of reason. Thus, restrictive covenants between dentists’ non-compete after employment termination are generally enforceable. That is as long as it is reasonable.
However, there are a few states which prohibit non-compete clauses. Please review your state laws for non-compete rules and regulations to see the specific rules for your state. The general test for reasonableness of these clauses holds that on employment termination. A covenant that restrains an employee from competing with his former employer is reasonable if:
- The restraint is not more than required to protect the employer,
- It does not inflict any untold hardships on the employer, and
- The restraint is not harmful to the public.
Non-Compete for Employees
In one such case, a provider restricted from practicing his specialty after leaving the hospital where he worked had their non-competition clause considered unreasonable. The judge ruled that this would be harsh if he enforced it. That is because there are only a few other hospitals in the area with subspecialties like these. They needed to protect themselves by preventing transfers of knowledge between providers.
Some doctors in Ohio must sign contracts promising not to seek employment with a competing company before being hired. These agreements have been controversial. But, the law is currently taking action on them that will help keep both parties happy for now. Recently found that these clauses were only enforceable if there was some legitimate interest from the employer’s end. And would damage their ability to find qualified staff later or hurt public health care. Those who need legal advice should consult an attorney before signing any contract like this. Hence, they know what rights may come into play down the road when things go wrong with their current job. That is, regardless of whether non-compete reviews by lawyers seem necessary at first glance!
When an Employer can Follow Through and Enforce
Many ask, are non-compete agreements enforceable from a business? The agreement is enforceable as long as a non-compete is written well and serves the employer’s interests but is not broader than necessary. Many myths have come about regarding non-compete agreements. It’s better to be safe and sure about any agreement you sign as an employee.
Non-competition Agreements that are Too Restrictive
Non-compete agreements prevent employees from leaving and joining a competitor company. This type of agreement can be very restrictive, with some states limiting the enforceability or, if fully enforced. Rendering is almost impossible for an individual who has left his previous job in that field to find work again. Non-competitive agreements may seem like they provide stability but do not protect companies. That’s because competition brings innovation to any business climate.
Non-compete agreements are preventing professionals from being able to find work in comparable jobs. Without properly written and phrased non-competes, professionals won’t be able to change employment when they need or want to freely. It has severe repercussions for this person’s life. It can mean that after years of education and skills training, they cannot get a job with the same pay anywhere else. That’s because there’s no competition for these positions within their geographic area!
When Courts Won’t Enforce a Noncompetition Clause From a Business
Whenever signing a non-compete, there has to be something of value given to the employee in exchange for signing the agreement. An exchange of value for a newly hired employee is typical that he gets employed for the job. Some other valuable considerations must be made for employees who have already been hired, or the non-compete can’t be enforced. The courts also won’t enforce an agreement when it restricts the competition for too long a period. Usually, 6 months is considered normal. It could vary from business to business. Suppose it restricts someone from working in a large territory. Then, the courts may not enforce non-compete agreements. Often, the towns, counties, or cities are listed. Still, if an area is too broad, it would be unfair and therefore not enforceable.
Physician Employment Agreement Review
Contracts are a pervasive and obligatory part of nearly all company and legal transactions. Well-drafted contracts help to enumerate the following:
- Responsibilities of the involved parties
- Divide liabilities, protect legal rights
- Ensure future relationship statuses.
These touchstones are even more crucial when applying their roles to the case of a provider employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be long and arduous, legal representation is a must to protect your rights.
The present-day conclusion is simple: A provider should not enter into any contract without having a physician’s contract reviewed by legal counsel.
There is too much risk for providers to take contract matters into their own hands. In addition to the specific professional implications. Contract terms can significantly impact a provider’s family, lifestyle, and future. There are many essential contract terms and clauses which can present complex and diverse issues for any provider, including:
- Non-compete clauses
- Verbal guarantees
- Insurance statements
Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. The advent of productivity-based employment agreements. Any provider must have an employment agreement reviewed before the execution. Attorney Robert Chelle has practical experience drafting and reviewing provider contracts for nearly every specialty.
Who Can Benefit From Contract Review?
- New residents
- Attending doctors
- Doctors entering their first employment contract
- Established doctors looking for new employment
You can ensure that you’ll fully understand the extensive and complex wording in your contract. That’s by employing an experienced attorney for your representation. You’ll be in a better position to decide whether you want to enter into the agreement by having a complete understanding of the contract. That will affect your career life for years to come.
The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs associated with a review. You are a valuable resource, and you should be treated and respected as such. Attorney Robert Chelle will personally dedicate his time to ensure you are fully protected. Assist you in the contract process to fairly represent your interest.
Every contract is unique. However, nearly all contracts for health care providers should contain several essential terms. Suppose these crucial terms in the contract are not explicit in contracts. In that case, disputes can arise when there’s a disagreement between the parties regarding the specific term. For instance, if the provider is expecting to work Monday through Thursday. Then, an employer expects the provider to work Monday through Friday. Still, the specific workdays are absent from the Agreement. Who prevails?
Physician Contract Checklist
Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of basic terms that contracts should contain (and a brief explanation of each term):
- Practice Services Offered: What are the clinical patient care duties? Are you given time to review administrative tasks? How many patients are you expected to see (like in pediatrics)?
- Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice-related positions?
- Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
- Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the Agreement? Is there a yearly review or quarterly review of compensation?
- Productivity Compensation: If there is productivity compensation, how is it calculated (wRVU, net-collections, patient encounters, etc.)? Is there an annual review?
- Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance, and holidays? Is there an HR guide?
- Continuing Medical Education (CME): What is the annual allowance for CME expenses, and how much is the amount of time off offered?
Assistance and Bonuses
- Dues and Fees: Which financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
- Relocation Assistance: Is relocation assistance offered? What are the repayment obligations during the termination of the Agreement before the expiration of the initial term?
- Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before completing the initial term? Are student loans paid back? Is there a forgiveness period for student loans?
- Professional Liability Insurance: What type of liability insurance offers (malpractice): claims-made, occurrence, self-insurance?
- Tail insurance Insurance: If tail insurance is necessary, who is responsible for paying for it after the termination of the Agreement?
Concerning Contract Termination
- Without Cause Termination: How much notice is required for either party to terminate the Agreement without the case?
- Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement termination?
- Non-Compete: How long does the non-compete last, and what is the prohibited geographic scope?
- Financial Retirement: Is a financial retirement plan offered?
- Non-Solicitation: How long does it last, and does it cover employees, patients, and business associates?
- Notice: How is the notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?
- Practice Assignment: Can the employer assign the Agreement?
- Alternative Dispute Resolution: If there is a conflict regarding the contract, will mediation or arbitration process be utilized? What is the standard attorney review process for conflict? Who decides which attorney oversees the process?
Suppose you have questions about claims-made or occurrence coverage and your current malpractice insurance. Are you interested in having your physician employment agreement reviewed? Contact Chelle Law today.
Other Blogs of Interest
- How Many Locations Should a Physician Non-Compete Apply To?
- Is 10 Miles a Reasonable Restriction in a Physician Non-Compete?
What Are Non-Compete Agreements? | Noncompete Agreements
Suppose a healthcare professional is about to take on a new job. Then, one 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. It 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.
Non-compete agreements are 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. It 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 is possible 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 be an instrument 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
Legalities of Non-Compete Agreements According to State Law
State law governs the non-compete agreements. It 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 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 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 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. It is due to the consequences that follow during contract termination, and you need to get a new job.
- If you leave your job, you will clearly understand what you can and cannot do. It 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.
- Suppose 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 obliged to stay in a job you don’t like because you are afraid of breaching your contract.
- Suppose you breach your contract. Your employer may sue you. It 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.
Suppose the employer asks you 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:
- The duration of the agreement
- Geographic scope
- 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.
Consult Someone Who Knows the Law
The first step is consulting an experienced employment lawyer. A lawyer can review and advise you on the agreement. Chelle Law has helped many healthcare workers review and negotiate their non-compete agreements. He would be happy to help you understand your rights and options under the law.
What Is a Non-Compete for a Physician? | Physicians Non-Compete
What is a non-compete in a physician contract? Of all the things in a contract besides compensation, this is probably the area I discuss the most with the physicians I’m reviewing their contracts. It can have enormous ramifications on a professional’s career depending upon several factors that we’ll get into. Let’s do some basics as far as non-competes go. In most physician contracts, there’ll be restrictive covenants. Restrictive covenants are things that the physician can’t do when the employment contract ends. Standard restrictive covenants would be a non-disparagement clause. You can’t badmouth the employer in some way. In the non-solicitation clause, you would be prohibited from actively soliciting patients, employees, other physicians, independent contractors, and business vendors from the employer. And then there would also be a non-compete.
What Does Non-compete Prohibit Health Care Providers From?
The non-compete essentially prohibits the physician from working within a specialty for a period in a certain geographic area. Let’s get into the details of that. First, in every contract, in the non-compete, there’ll be a section that details what the physician can’t do. That means it’s an internal medicine physician working as a hospitalist. The non-compete would state that the physician can’t work as a hospitalist for some time within the specific area. One thing to consider here is if you are in a specialty where you can do different things, let’s take the internal medicine physician as an example. They could do primary care. They could do urgent care, ED, and be a hospitalist.
If the non-compete says you can’t practice medicine within that area, that can pose problems if the physician needs to be in that area. So, you want to ensure that it explicitly states your specialty for the employer. Suppose you’re a hospitalist. Then, it just needs to say, the physician can’t work as a hospitalist within that area, within that time, not the practice of medicine. For many physicians who can do multiple things, an easy way around the non-compete, although maybe not a perfect scenario, could for a year do something else. And then, after that year, they return and work within their desired specialty. That’s the first thing. What does it entail? Is it the complete practice of medicine, or is it just in your specialty? It should be just in your specialty.
How Long Is the Non-compete?
Next, how long is the non-compete? Well, most non-competes are in a year. Many employers will stretch it out to two years. I don’t think anything above two years would be enforceable anywhere. If you are a physician, you do not want a non-compete for longer than one year. It’s just a fair amount of time. I think, no, this is state-specific, right? I’m giving you a broad outline of this. I can’t go through all the states in this video, but most courts have held that one year is the limit that they would consider a reasonable non-compete length. If you have a non-compete, you want to limit it to at least one year, nothing beyond that.
Geographic Restrictions of a Non-Compete
And then the geographic restriction. It is probably the most important one. Once again, generally, anywhere between 5 to 15 miles would be considered a reasonable non-compete. Now, in some states, they’ll push it for whatever reason. The Midwest states seem to put more than that. So, 20 miles is not uncommon. It would be best if you also thought about your location. Twenty miles in a rural location completely knocks you out of a city is very different. More than 20 miles in a big metropolitan area can knock out many potential opportunities.
Maybe you’re a cardiologist in a small town in a smaller state, and it says 20 miles from your office. Well, there may not be another office you could even get into within those 20 miles, so that doesn’t matter. Let’s say you’re in Phoenix, where I am, and 20 miles here could potentially knock out hundreds, thousands of jobs. So, you would like to limit it to a small geographic restriction. I’ve seen so many variations. It could be by county. In the south, they seem to use counties more than just mileage; typically, it’s as the crow flies. If it says you can’t practice within your specialty for one year within 10 miles of the office, it’s not a Google map road of 10 miles. It is as the crow flies. So, stick a pin in it, 10 miles around that. That’s how it’s calculated.
Non-Compete Matters to Most Health Care Providers
For many people, a non-compete might be the most important thing in a contract. On some others, it might not matter. For physicians who are in a city that they don’t have any ties to, they’re just there for the job. They don’t care if they’re there after the fact, then we would spend more capital on getting different things changed in the agreement. Maybe the compensation or providing tail insurance or something like that. But suppose you are a physician who is moving to an area to be near a family, or maybe you have a family. In that case, you don’t want to pull your kids out of school and move them across the country. Well, then, the non-compete could be the absolute most crucial thing.
How Negotiable Are Non-competes?
If you’re with a private physician practice, I find much more leeway in negotiating the non-compete. Many larger hospitals and healthcare networks may say, take it or leave it. We’re not going to deal. I also find that some of those big hospitals change their non-competes frequently. We have a vast healthcare network where I live. Every year, it fluctuates between different mileage and whether you can join a private practice, which goes back and forth. You certainly have leverage in getting that changed in some instances. Still, honestly, I wish I had a better answer for you. But in some cases, it’s going to be a take-it-or-leave-it offer.
So, you need to think about, alright, what’s the most important to me? And then you always have to get to the point where once again. Suppose you have to stay in a community. Then, you won’t have any options to practice under the terms of the non-compete. You have to figure out a way to move on. Some jobs are not worth it. And if you accept a job, you’re accepting the non-compete, they are enforceable, and there are only a few states where it’s not enforceable. When you sign that agreement, you need to understand that that non-compete will likely be enforced if necessary, and whatever terms you agree to are the terms that will hold.
Non-Compete Negotiation Tips
Lastly, if you are negotiating a non-compete, you may offer some concessions in other areas. For instance, with the non-solicit, it may say you cannot attempt to solicit patients, employees, or whatever. Well, you could say, for example, I agree not to hire, not just solicit. I will not hire any employees or any other physicians or independent contractors. That way, you’re less of a threat. If you’re like a primary care type specialty, you will open a new office. The biggest concern of any employer is they bring a physician in, leave, then take all patients and employees, and that old employer is stuck. Maybe giving somewhere else might be worth the employer agreeing to amend the non-compete in some way. So, those are the basics of a physician’s non-compete.
Physician Contract Questions?
Contract Review, Termination Issues and more!