Ideally, a physician non-compete should only apply to the physician’s primary practice location. The primary practice location is generally considered the location where the physician generates the majority of their charges. A non-competition clause for a physician is a legally binding clause that prohibits the physician from working within a defined geographic area for a specific period.
One Location vs. Multiple Locations
Many employers will attempt to attach the geographic restriction to as many locations as possible (if the employer has multiple locations or the job requires work at other medical facilities). The physician should reject this and attempt to limit the geographic restriction to two locations at most. Customary locations the employer will attempt to attach the physician’s non-compete to include:
- Primary Office
- Other Employer Offices
- Primary Facility (Hospital, ASC, etc.)
- Other Hospital owned facilities
Geographic Restriction Radius
The geographic restriction for any non-compete is determine “as the crow flies” which is the most direct distance between two points (not driving distance).
Breaking an Agreement with Non-Competition Law
Physicians with non competition agreements in their contract were originally considered as restraints of trade, and thus were invalid on the grounds of public policy at common law; however, many restraints of trade incident to contracts were upheld based on the rule of reason. Thus, restrictive covenants between dentists not to compete after termination of employment are generally enforceable 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 what the specific rules for your state are. The general test for reasonableness of these clauses hold that on termination of employment, a covenant which restrains an employee from competing with his former employer is termed reasonable if:
- The restraint is not more than required for protecting the employer,
- It does not inflict any untold of hardships to the employer, and
- The restraint is not injurious to the public.
Non-Competition for Employees
For instance, in Ohio, a non-competition clause with a business was considered unreasonable after judicial review when it was noted that a provider’s sub-specialty was uncommon, and that it would be harsh if the restrictive covenant was enforced as the hospital where he was precluded from practicing was only one of the few institutions in the area where he could practice his specialty.
Thus, in Ohio, covenants restraining providers from competing with his employer upon termination is considered unreasonable if it inflicts hardship on the doctor, is injurious to the public, if the demand for the doctor’s health care expertise is important for the community people and if the doctor’s services are important for the health, care and treatment of public. However, non-competition clauses for doctors, in general, are enforceable as long as they protect some of the employer’s legitimate interests. Having a non-compete review by a lawyer can assist in avoiding legal issues.
When a Practice Can Enforce
Many ask are non-compete agreements enforceable from a business? As long as a non-compete is written well, and serves the interests of the employer but not broader than necessary, the agreement is enforceable. Many myths have come about regarding non-compete agreements, and it is much better to be safe and sure about any agreement you are signing as an employee.
Agreements that are Too Restrictive
Some non-compete agreements are very restrictive. This can mean either the state will limit the enforceability of the agreement or if fully enforced, the employee may find it almost impossible to get work in the field after leaving that job. Non-compete agreements can stop a person from working in the same industry that he just left. This can mean that after years of education and learning skills, he or she can’t find a similar job with comparable pay in a specific geographic area. Without properly written and phrased non-competes, professionals won’t be able to freely find work, or be able to change employers when they need to. A noncompete agreement has real life consequences.
When Courts Won’t Enforce a Noncompetition Clause
Whenever a non-compete is signed, 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 typically that he is being hired for the job. For employees who have already been hired, some other consideration of value must be made 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 a 6- month period is considered normal. This could vary from business to business. The courts may not enforce non-compete agreements if it restricts someone from working in a large territory. Often the towns, counties or cities are listed but if too wide an area, it would be unfair and therefore not enforceable.
Medical Employment Agreement Review
Contracts are a pervasive and obligatory part of nearly all company and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and insure 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 a long and arduous process, legal representation is a must in order to ensure that your rights are being protected.
The present-day conclusion is simple: A provider should not enter into any contract without having the agreement reviewed by legal counsel.
There is simply too much at risk for a provider 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 important contract terms and clauses which can present complex and diverse issues for any provider, including:
- Non-compete clauses
- Verbal guarantees
- Insurance statements
Additionally, often times the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity based employment agreements it is imperative that any provider have an employment agreement reviewed before it is executed. Attorney Robert Chelle has practical experience drafting and reviewing provider contracts for nearly every specialty.
New residents, attending doctors, doctors entering into their first employment contract or established doctors looking for new employment can all benefit from a thorough contract review. By employing an experienced attorney for your representation, you can insure that you will be able to fully understand the extensive and complex wording included in your contract. By having a full and complete understanding of the contract, you will be in a better position to make your own decision on whether or not you want to enter into the agreement which 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 make sure that your are fully protected and will assist you in the contract process so that your interests are fairly represented.
Every contract is unique. However, nearly all contracts for health care providers should contain several essential terms. If these essential terms in the contract are not spelled out in contracts, disputes can arise when there is a disagreement between the parties as to the details of the specific term. For instance, if the provider is expecting to work Monday through Thursday and the employer is expecting the provider to work Monday through Friday, but 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 essential 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 for review of 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 of medicine 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 an annual 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 a HR guide?
- Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
- 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 if the Agreement is terminated prior to 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 the initial term is completed? Are student loans paid back? Is there a forgiveness period for student loans?
- Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
- Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
- Without Cause Termination: How much notice is required for either party to terminate the Agreement without case?
- Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement is terminated?
- 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 notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?
- Practice Assignment: Can the Agreement be assigned by the employer?
- 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?
If you have questions about claims-made or occurrence coverage and your current malpractice insurance or are interested in having your employment agreement reviewed contact Chelle Law today.