Why You Should Look at Your Non-Compete Clause Closely

September 6, 2016
Kyle Claussen, JD

Here are a few areas of a typical non-compete clause to look closer at when signing your employment contract.

The non-compete clause is designed to limit the negative impact you can have on the business of a former employer. As an employed physician, you spend time developing relationships with your patients. If you leave your practice or hospital, but don’t stray too far from your original practice site, you may take some of the patients who prefer you away from your former employer.

A non-compete is set in place to protect your employer in the event that you leave, or you are fired, and often sets a geographic area in which you cannot practice. Of course, this seems like a fair agreement from the perspective of market competition and is not limited to just physicians. However, there are portions of your non-compete clause with which you should be wary, as they can extend too far both literally and figuratively.

Time and Distance

One of the first pieces of your non-compete clause that you should scrutinize is the specified geographic area and duration of the restriction on your ability to practice. If you are seeing a non-compete clause that features any length of time over two years you should look to renegotiate. What is fair for a geographic restriction will vary by location. A 100-mile restriction in a rural setting may be fair, while five miles may be the norm in a major metro. Keep in mind that physician relations have been cited as a top concern among hospital and practice administrators, so you do have leverage in making sure your non-compete terms are fair.

System Size

Consider the implications of your non-compete when you are looking to sign with a large health system. These systems will likely have multiple locations, sometimes spread across entire regions. Often times, you will be expected to cover other hospitals or practices in addition to your primary site. Look at your non-compete to see if the contract restricts your practice from within the radius of just your main practice site or all of the health system’s locations in which you worked. Obviously, widespread restrictions can be very detrimental to your future job prospects.

State

Many of the provisions in non-compete clauses are dependent on what state you practice in. It is important for you to familiarize yourself with the intricacies of how your current practice state, or prospective practice state, applies the laws regarding non-competes. In some cases, the state may have the ability to reform the enforcement of your non-compete to make it more reasonable. They may also be able to enforce it just as written, so consult with an attorney when looking to practice in a new state.

Specialty

When your employment is terminated, if you are board certified in multiple practice areas, you may not be looking to practice in the exact same capacity as when you were with your previous employer. In cases such as these, where you may be taking on an administrative role or focusing on a different area of care within your specialty, you may have a case to get out of your non-compete clause. For example, a physician may be board certified in both family medicine and emergency medicine. If they were to leave a hospital where they were practicing as an emergency medicine physician and join a group practice where they practiced solely as a family medicine physician, they would have a strong case that they are not violating their non-compete terms. This is due to the fact they are no longer directly competing with their previous employer.

In such cases, looking closely at the language used when defining the limitations regarding your next role is crucial to ensure that the clause is fair. If more general phrasing is used, such as restricting your “practice of medicine,” then you may still be limited even if you are wanting to practice within a different specialty or subspecialty.

Exit Strategy

Non-compete clauses can be particularly subtle because often physicians do not plan for an exit strategy when signing a new agreement.  Clauses involving compensation and benefits are much more likely to be top of mind because they seem much more tangible. Do not underestimate the effects of the non-compete clause, and plan ahead to ensure that your exit is a smooth transition. As with the rest of your contract provisions, consult an attorney experienced with physician contracts in order to successfully navigate the non-compete clause.

Kyle Claussen, JD is the Vice President of Resolve Physician Agency and a seasoned physician contract attorney who adds tremendous value to Resolve clients through guidance on the intricacies of physician-employment agreements. Kyle is one of the leading physician contract attorneys in the nation and has assisted thousands of physicians across all specialties.