What are the consequences of a non-compete? What are the basics of a non-compete and then how it can affect your career? In short, for any professional who signs an employment contract, I would say more likely than not, there’ll be non-compete in the employment agreement, assuming it’s in a state that doesn’t completely prohibit non-competes. There are a handful of states in the United States where non-competes are completely unenforceable but I’m going to talk about the states where they are enforceable. In this case, let’s say, you sign an employment contract, there’s a non-compete in the agreement. So, what are the basics of a non-compete? Well, a non-compete essentially says, you cannot work in a certain specialty for a certain amount of time within a certain geographic radius.
Let’s talk about that. Let’s take a physician for example. The non-compete would say, let’s just say it’s a cardiologist. It would say, you can’t work as a cardiologist for one year within 10 miles of your primary practice location. After the contract terminates, the cardiologist could not establish a practice or work for another company that has a location within a 10-mile radius. It’s 10 miles as the Crow flies, not street miles. I know some people will come to me and say, well, if you do the streets, it’s 10 miles, but no, it’s sticking a pin in a map, 10 miles in a big circle around that location. Now, things to think about if you’re going to sign a non-compete, and let’s just go for a sales professional for example. I find that non-competes for salespeople are much broader than for healthcare professionals for whatever reason.
So, you want to limit the non-compete as much as you can. Three things to think about, one, you want it very specific as far as the non-compete applies to what you’re doing for that company. And in sales, while this is important, let’s just say you’re selling software. And then the non-compete says you can’t work in sales for one year within the state or something like that. Well, most people could easily switch industries if they’re very good in sales. You don’t want to say you can’t do sales entirely. You would just want it to say, I can’t do software sales, or even more specifically, I can’t do banking software sales within whatever. Be very careful that the specialty is narrowly defined to what you are doing for that employer. Other blogs of interest include:
You don’t want as broad as possible. There are some physicians who can do multiple things. Let’s say, you’re an internal medicine physician. You could do primary care, you could be a hospitalist, you could do urgent care. If you’re with an employer and just working as a hospitalist, then you want to make certain that you could do either urgent care or primary care for that restrictive period. That way, you don’t have to move if you don’t want to. The next thing is the geographic radius. Now, this is specific to the profession. As I said before, healthcare professions are kind of narrow, sales are much larger, executives are much larger. But you want to narrow it as much as possible. An entire state would be, at least I would consider that very unreasonable.
You want to get it as tight to the location that you’re in as possible. Let’s say, you are in sales and you’re bouncing around an entire state. Well, try to get five miles from every customer that you’ve provided service to or to your largest accounts or I mean, there are many ways to do it, but you want to narrow that geographic radius to as small as possible. And then the last thing was how long it lasts. Anything over two years, I would consider very unreasonable, unlikely unenforceable. For healthcare providers, one year is the most normal amount for a non-compete. Some people push it to two, but for anyone, if you’re signing a non-compete that’s five years in length, or even 10 years or crazy amount, you absolutely want to get that down do at maximum two years.
Once again, for sales, I find the length of time can be very long. And even though some of these may not be enforceable, you never want to sign an agreement that has terms that you’re just saying, well, I’ll just sign it anyway, because it’s unenforceable. Well, that might be true, but you’re going to have to litigate it or go to arbitration and no one wants to do that. So, you need to do the work upfront before you sign the contract. Those are the consequences of a non-compete. You won’t be able to work in your specialty for a period within a certain geographic radius. And then, after the non-compete is over, you’re free to work anywhere that you’d like. I find when I’m doing employment contract review, this is easily probably top three, sometimes number one for a lot of people. If you are married to a location, your family is there, you have kids in school you grew up somewhere, you never want to move, the non-compete can easily be the most important thing for a professional.
For others, they’re like, I’m just here for the job, when this job ends, I’m moving on, and for others, it’s not important at all. You need to do an assessment of, alright, is this important to me or not? And then how much emphasis do I need to put on this when I’m doing the negotiation for the employment agreement?
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