How Do Physician Non-Compete Agreements Work?

A contractual non-compete clause (also known as a covenant not to compete or a restrictive covenant) will preclude or limit you from working in a 1) particular field, 2) within a specific geographic area, and/or 3) for a stated period of time should you separate from service with an employer or group. If you are looking at a non-compete agreement, what is negotiable and what isn’t?

Particular field: The definition of working in a particular field probably needs no further explanation. This area of the non-compete is meant to limit you from working in the same profession in regard to the next two non-compete limitations, and should not be meant to prohibit you from changing to a different career during the defined time period and geographical region.

Geographic region: Your agreement will stipulate an area surrounding your current employer, possibly to include locales of significant business relationships that your employer enjoys. You should be wary of a non-compete that prohibits you from working in an overly broad region. The definition of “broad” is dependent upon the location of your employer, however. For example, a prohibition to work in lower Manhattan could be considered overly restrictive, while a similar limitation in the same size area of Kansas might be reasonable. Geographic region may be negotiable.

Stated period of time: Your non-compete clause should identify a specific length of time in which you are prohibited from practicing in the defined geographic area. Typically, two years or less is considered reasonable but state laws vary. This, also, may be negotiable.

In general, non-compete agreements are not looked on favorably by the court system and some states even prohibit enforcement so it’s important to know the rule of law in your jurisdiction. If you find yourself faced with a non-compete for a lucrative position that you are well-suited for, don’t give up. You (or your prospective employer) may be able to “buy out” of the non-compete clause and avoid a legal battle so that you can continue working in the same general geographic area and not start from scratch in a new location.

Expect more stringent non-compete terms in negotiating a partnership agreement than in a contract as an employee. Your new employer can also be held liable for damages if a dispute arises between your old and new relationships if s/he is aware that you might be violating the terms of a non-compete with your prior employer or group.

Negotiating the terms of a non-compete agreement is a delicate process. While you don’t want to give your prospective employer or group the impression that you are already planning your next move after leaving, you do want to protect yourself and your family should the position not work out.

The above is simply a general overview of non-compete agreements. For a more specific discussion of the particulars of your specific non-compete clause, you should have an expert review your contract, such as the excellent group at Contract Diagnostics.

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