Should you worry about a non-compete? In short, it depends upon your specific situation. If you have signed an employment agreement or, in many cases, an independent contractor agreement, most of the time, it’s going to contain restrictive covenants, and those are essential things you either can’t do during the contract or after the contract ends. The most common restrictive covenants would be non-compete, non-solicit, non-disparagement, and some confidentiality. So, you need to look closely at what these say because this could affect your professional career after the contract is terminated.
Non-Competes Are Enforceable in Most States
Let’s just talk about non-compete. One of the, I’d say biggest misconceptions I hear from professionals is when they say, well, my friend, my colleague, or whoever, told me non-competes aren’t enforceable anyway. So, why does it matter what it says? That’s not true. There are a few states where non-competes are completely unenforceable, but there’s only a handful. You’re likely in a state where non-competes are enforceable.
So, you need to take that into account. I would never suggest that someone sign a contract, I guess with the expectation that, oh, well, it won’t be enforced, so don’t have to worry about it. Well, okay. But you might have to go through litigation or if there’s an arbitration clause in your contract, arbitration, and then you may lose if you try to push it. You need to go into any employment agreement or independent contractor agreement that you’re going to sign, willing to follow the terms of the agreement. And that includes the non-compete.
What Does a Non-compete Do?
What does a non-compete do? A non-compete will stop you from working in a specific specialty for a specific amount of time within a certain geographic radius or location, depending upon what profession you’re in. Most non-competes would be one to two years long, and then the kind of geographic restriction can vary wildly based upon the profession. Now, if you’re a healthcare provider, normally it would be 10 to 15 miles from your primary practice location, maybe two locations if you’re maybe working in an outpatient clinic and then you do surgery in the hospital or something like that. Whereas if you’re in sales or maybe an executive, it might be much broader. It could be counties; it could be a state. The ones that kind of cover an entire state are much less likely to be enforced than those that have a tighter geographic restriction.
During Negotiations, Make the Non-Compete Specific
But here are some things you need to think about. First, as far as the specialty listed. This is very important. It will state that you cannot do X for whatever amount of time. And so, the X part is important. Let’s say you’re in sales and you do banking software. Well, you want it to say, you cannot provide sales in banking software for one year and three counties or something. If it just says sales, you have no alternatives as far as what’s in the geographic restriction.
So, you want to tailor very narrowly. And the same thing goes for, let’s just say, it’s a physician who does internal medicine. You don’t want it to say internal medicine. You want it to be specific to whatever you’re doing for that employer. If you’re an IM, you can be a hospitalist, you can do urgent care, you can do an emergency room, and you could do primary care. So, you have a bunch of different options. And you just want it to be whatever it was you were specifically doing for that employer. That’s what it should say as far as the scope goes.
Acceptable Length and Geographic Restrictions of the Non-Compete
As far as time goes, one to two years is standard. I would always lean obviously more towards getting a client one year instead of two, but it’s going to be somewhere between that. Sometimes I’ll see sales agreements that are like five years in length. No, you can’t accept more than two years. And then, as far as geographic restrictions go, as I said before, this kind of varies from state to state. Maybe 20 miles in one state would be completely unreasonable in another. And then it also has taken to account the setting that you’re in. Is it rural? Is it urban? 20 miles in New York City is much different than 20 miles in a rural town in Idaho. So, you need to think about whether you’re willing to accept and whether you’ll have to move.
When I talk to a client, many of them will accept a job or move to a location, and they’ll say, no matter what happens after this agreement terminates, we are leaving. So, the non-compete does not matter to me at all. Whereas I’ll have another client that says, my family’s there, I grew up there, my kids go to school, there is no way that I can move from the city that we’re in after this contract ends. And in that scenario, the negotiation for the non-compete can be incredibly important.
Many people obviously don’t want to have a complete disruption in their lives for a year or two. They must travel far distances to do their work just because of the non-compete. So, should you worry about the non-compete? It would depend upon your situation, and whether you plan to stay in the area or not after the contract terminates, but yes, if it matters to you, it’s likely going to be enforceable, and it certainly can stop you and can be enforced in most states.
Other Blogs of Interest
- Everything You Need to Know About Medical Employment Contracts
- Can a Non-Compete be Enforced on a 1099 Employee?
- What is a Non-Compete for a Physician?
- Is a 2-Year Physician Non-Compete Too Long?
- Is 10 Miles a Reasonable Restriction in a Physician Non-Compete?
- How Many Locations Should a Physician Non-Compete Apply To?
- Is a Non-Compete Enforceable Against a Physician?
What Are Non-Compete 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.
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 on.
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 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 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 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 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 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 negotiate their non-compete agreements. He would be happy to help you understand your rights and options under the law.
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