Non-Competes and Physician Contracts
Getting the job offer might seem like the final step in securing your dream job as a physician. While signing your physician employment contract may seem like a mere formality, this step requires great care and diligence. Physician contracts often contain provisions that, if left unnegotiated or unaddressed, could impose significant financial burdens or restrictive conditions on the physician in the future. One particularly important clause to thoroughly understand before signing on the dotted line is a non-compete provision. Although non-competes have garnered significant attention in the media recently, physicians may still find it challenging to fully comprehend their implications and potential impact on their practice and personal lives. Here is what you should know about non-compete provisions before you accept the offer.
Understanding Non-Compete Provisions
A non-compete provision, also referred to as a non-competition clause or covenant not to compete, is a contractual agreement between an employer and an employee or between a business entity and a contractor or partner. This provision restricts the individual or party from engaging in activities deemed competitive with the employer or contracting entity for a designated period and within a specified geographical area following the termination of the employment or business relationship. Non-compete agreements typically delineate specific activities or industries in which the individual or entity is prohibited from participating. An example of a non-compete provision for a physician would be a prohibition on practicing medicine within a certain radius of the current employer for a set amount of time.
Purpose of Non-Competes
Non-compete provisions are designed to safeguard an employer’s or contracting entity’s business interests, preventing former employees or partners from using confidential knowledge, such as proprietary information or client relationships, to engage in unfair competition. In the context of physician contracts, these provisions aim to prevent physicians from using their insider knowledge—such as patient lists or proprietary medical practices—to compete directly with their former employer. However, opposition to non-compete provisions at both the national and state levels is growing. The full impact of this opposition is not yet clear.
Ways That Non-Compete Provisions Affect Physicians
Non-compete provisions can affect physicians, both professionals and personally. Here are three ways that they affect physicians:
- Career Mobility: Non-compete clauses can limit a physician’s ability to relocate or switch employers, particularly if the restrictions are broad or cover a large geographic area. This limitation can hinder career advancement and opportunities in other medical practices.
- Earnings Potential: Restricting a physician’s ability to practice in certain areas can reduce their earning potential. For example, if a physician is prohibited from working in a high-demand specialty or geographic area, they may face diminished income opportunities.
- Personal Life: The restrictions imposed by non-compete clauses can affect a physician’s personal life, particularly if they are forced to move or significantly alter their career plans due to contractual limitations.
Do Non-Competes Make Sense for Physicians?
Non-compete agreements may seem logical for protecting trade secrets, leading physicians to assume they are not applicable to their profession. However, many physician employment contracts include non-compete provisions, not to safeguard proprietary information but to prevent doctors from leaving for competing practices. This is particularly relevant given the national physician shortage. Consequently, physicians’ employers use non-compete clauses to retain them at their practices.
Non-compete provisions are prevalent in physician contracts. The American Medical Association reports that over a third or nearly half of all physicians are subject to non-compete clauses. Many physicians are opposed to non-compete provisions. The American Medical Association has supported efforts to ban most of these provisions, arguing that they hinder career advancement, particularly for early-career physicians, and limit their ability to provide care in underserved communities, further restricting patient access to healthcare.
What Happens If I Don’t Comply With the Non-Compete Provision?
Not complying with a non-compete provision can lead to significant legal and financial consequences. If a physician violates the terms of the non-compete agreement, the former employer may pursue legal action. This could result in the physician being subject to an injunction. Violations could also lead to monetary damages, including the former employer seeking compensation for any business losses resulting from the breach.
Are Non-Compete Provisions Actually Enforceable?
The enforceability of non-compete provisions depends on the jurisdiction and the specific circumstances of the case. Employment contracts are governed by state law. A trial court will assess the contract’s terms and provisions according to the statute. It will examine whether the non-compete provision is necessary to protect a legitimate business interest and will also evaluate any undue hardship on the physician. Factors such as the duration of the agreement, its geographic scope, and the prohibited activities will be considered. If the court deems the contract unreasonable, it is likely to be found unenforceable.
Must I Accept a Non-Compete Provision In My Contract?
No. Physicians are not required to sign a contract that they are not comfortable with. Of course, the employer can withdraw the offer if the physician does not accept the provision. This is where contract negotiation comes in, and it is beneficial to be represented by a physician attorney in this process. Physicians are often assured that non-compete provisions are normal parts of contracts, and a physician will simply accept their presence. Attorneys specializing in physician contract reviews are knowledgeable about contract terms and can assist in removing unfavorable provisions and including favorable ones. Having legal representation during the process can enhance your leverage and help you avoid detrimental terms.
Contact a Seasoned Physician Contract Review Attorney
While many prospective employees do not typically seek legal counsel before signing an employment contract, it is crucial for physicians to have their employment agreements undergo legal review by an attorney. Despite reassurances from those reviewing your contract, non-compete provisions are significant and can greatly limit your practice locations, timing, and areas of specialization for an extended period. These restrictions could impact your earnings and personal life. It is crucial not to underestimate the importance of non-compete clauses. Before signing, contact a skilled physician contract review attorney. If you have already signed, there may still be grounds to amend your contract, and a physician contract attorney can assist with this process.