The Non-Compete Clause: What is it? Is it enforceable?
The Positives and Negatives of a Non-Compete Clause
When reviewing an employment contract, one of the first things physicians look for is the non-compete clause. It’s only natural to think about the level of job flexibility if they wish to leave an employer, especially when it’s not a good fit. Statistically, younger physicians will remain at their first job only two to three years.
A non-compete clause limits a physician’s ability to work:
- (a) for a certain amount of time and
- (b) in a certain geographic area. Generally, the non-compete restriction will last about 2 years and cover an area with a particular radius (e.g. 20 miles from a certain location).
From the employers standpoint, a non-compete is an effective way for an employer to “protect their turf” and lower the likelihood that a former employee will leave them and take away patients and accompanying revenue.
Common Misconceptions of Non-Compete Restrictions
Many physicians doubt the enforceability of non-compete restrictions. Others believe that even if the restrictions are enforceable, employers won’t bother enforcing them. The truth is of the matter is that most non-compete restrictions are enforceable, and employers will enforce them.
Whether a non-compete clause is enforceable depends upon which state the employer is in. Different states have different laws. For example, in California, non-compete restrictions are generally disallowed. On the other hand, in Texas, non-compete restrictions are allowed, but, contracts including them must be written a certain way which allow the physician to buy out the contract for a predetermined amount of money.
Some physicians don’t worry about non-compete clauses because they don’t plan on staying in the area if they leave their current employer. For example, a physician working in Minnesota may not worry about his non-compete restrictions because he plans on moving back to Florida, to be near family. (Generally, non-compete restrictions cannot extend more than 25-75 miles.) Other physicians want to negotiate as much flexibility as possible because they plan on staying in the area. This can be done by requesting one or more changes to the non-compete restrictions: shortening the time period, lessening the geographic scope, asking for a “buy out” clause as mentioned above and/or limiting the types of circumstances in which the non-compete will apply. In relation to the last point, one could attempt to have the non-compete apply only in situations in which termination is the physician’s fault. If termination is the employer’s fault, why should the employer capitalize from that further and be able to limit where the departing physician seeks new work?
Non-compete provisions are often complex. A qualified lawyer can help research the applicable state laws and assist in the negotiation of better terms, if necessary.
If you need assistance to navigate a non-compete agreement, we can help. Our team of experienced contract attorneys will assist you to determine if the agreement is fair and reasonable for both you and your employer.
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