Many physicians enter into employment contracts without paying much attention to the fact that the agreement may contain a “non-compete” clause. Non-competes generally prevent a physician from working for a direct competitor for a certain period of time and in a defined geographic area once the employment relationship has ended. Hospitals, medical practices, and other health care entities use non-competes to prevent their physicians, who they highly value, from jumping ship and taking their skills, knowledge, and the employer’s patients to a direct competitor. Because they operate as a partial restriction on trade by limiting a physician’s freedom to choose his next employer, these post-employment covenants are carefully scrutinized by courts. However, the fact that non-competes are disfavored does not mean they are unenforceable. Indeed, non-competes in physician employment agreements are generally valid and enforceable, provided they are reasonable, ancillary to an otherwise valid contract, and supported by adequate consideration.
Given the impact of a non-compete on a physician’s ability to practice and the possible benefits it provides to employers, it is vitally important to have them negotiated, drafted, and/or reviewed by experienced health care counsel. Accordingly, a physician’s best course of action when confronted with a non-compete is to engage counsel before entering into an employment agreement. Similarly, hospitals, medical groups, and other health care entities would be well-advised to seek the assistance of counsel with respect to the validity and enforceability of any non-competes they wish to include in their employment agreements.
ASG Law can advise you with respect to physician-facility or physician-practice group agreements.