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Is a Non-Compete Enforceable Against a Physician?

Yes, 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.  For instance, a physician could be prohibited from working within their specialty 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 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-Compete Buy-Out

Some states require a non-competition to include a buy-out.  The buy-out amount is usually equal to 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:

  • California
  • Delaware
  • Massachusetts
  • Rhode Island

Breaking an Agreement with a Noncompete Clause

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.

No Compete for Employees

In one such case, a provider who was 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 it were enforced because there are only few other hospitals in the area with subspecialties like this one’s and they needed to protect themselves by preventing transfers of knowledge between providers.

Some doctors in Ohio are required to sign contracts promising not to seek employment with a competing company before they can be 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 it was found that these clauses were only enforceable if there was some legitimate interest from the employer’s end and would damage their ability of find qualified staff later or hurt public health care as well. Those who need legal advice should consult an attorney before signing any contract like this so they know what rights may come into play down the road when things go wrong with their current job 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? 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.

Non-competition Agreements that are Too Restrictive

Non-compete agreements are designed to 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 it 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 really do not protect companies since competition brings innovation within 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 freely change employment when they need or want too. This has serious repercussions on this person’s life as it can mean that after years of education and skills training, he or she cannot get a job with the same pay anywhere else because there is no competition for these positions within their geographic area!

When Courts Won’t Enforce a Noncompetition Clause From a Business

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.

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 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
  • Damages
  • Indemnification
  • 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):

  1. 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)?
  2. 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?
  3. Practice Call Schedule: How often are you on call (after hours office call, hospital call (if applicable))?
  4. 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?
  5. Productivity Compensation: If there is productivity compensation; how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
  6. 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?
  7. Continuing Medical Education (CME): What is the annual allowance for CME expenses and how much time off is offered?
  8. Dues and Fees: Which financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
  9. Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the Agreement is terminated prior to the expiration of the initial term?
  10. 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?
  11. Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
  12. Tail Insurance: If tail insurance is necessary, who is responsible to pay for it when the Agreement is terminated?
  13. Without Cause Termination: How much notice is required for either party to terminate the Agreement without case?
  14. Practice Post Termination Payment Obligations: Will you receive production bonuses after the Agreement is terminated?
  15. Non-Compete: How long does the non-compete last and what is the prohibited geographic scope?
  16. Financial Retirement:  Is a financial retirement plan offered?
  17. Non-Solicitation: How long does it last and does it cover employees, patients, and business associates?
  18. Notice: How is notice given? Via hand delivery, email, US mail, etc.?  Does it have to be provided to the employer’s attorney?
  19. Practice Assignment: Can the Agreement be assigned by the employer?
  20. 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.