Although the following might seem obviously overly broad to some, a review of contracts with the following geographic restrictions should be considered red flags:
- Prohibition to practice anywhere in the U.S.;
- Prohibition to practice anywhere in a specific state;
- Prohibition to practice in a territory comprised of excessive miles from the employer’s location; and
- Prohibition to practice in certain counties.
Please note that exclusion to practice in certain counties might be overly broad in some situations but might be acceptable in others. For example, a hospitalist sold his ownership stake in his practice, and part of the deal required him to agree not to practice in Los Angeles County. This particular county restriction would be difficult, if not impossible, to enforce because Los Angeles County includes more than 80 cities and covers more than 4,000 square miles.
Is Durational Scope Reasonable?
A noncompetition clause should identify the length of time in which the physician is prohibited from practicing within the restricted geographic area. Whether the durational scope is reasonable will vary from state to state. As a general rule of thumb, if the restricted time frame is two years or less after termination of the contract, the time restriction will likely be considered “reasonable.” However, state laws vary on whether time restraints in excess of two years are enforceable.
A common pitfall with time restrictions is excessiveness based on the state’s laws and the specific circumstances of the physician and the employer. In negotiating the restricted length of time in a noncompetition clause, it is more common to have a longer time restriction when a physician is selling an ownership interest in a practice than for a physician entering into an employment relationship.
Prospective Employers: What You Need to Know
Great care must be taken when hiring a physician. States recognize the legal theory of interference with a contract. If an employer is recruiting a hospitalist who is subject to an employment agreement with a noncompetition clause, the prospective employer must be very careful in the recruiting process. It is recommended that the employment agreement include a representation by the physician-employee that he or she is not subject to any other agreement that would prohibit the physician from entering into the new employment relationship.
If a prospective employer is aware of an existing employment contract that contains practice restrictions on a recruited physician, the prospective employer could be held responsible for damages if a dispute arises between the parties.
It’s All in the Words
Although it might seem like semantics, a few words can change your future. Before you put pen to paper, be sure to have any contract containing a noncompetition clause reviewed by a lawyer who is well-versed in your state’s laws. If you have already signed an agreement with a noncompetition clause and you are considering your next career move, a lawyer can shed some light on a seemingly impenetrable clause.
Steven M. Harris, Esq., is a nationally recognized healthcare attorney and a member of the law firm McDonald Hopkins LLC in Chicago. Write to him at [email protected].