6 Ways to Free Yourself From a Noncompete Agreement

Mark Crane

Disclosures

September 29, 2011

In This Article

Introduction

Noncompete agreements are either a smart protection for honorable employers or an unfair weapon pummeling innocent doctors who need to make a living -- depending on which side of the fence you're on.

To protect themselves, most practices demand that new associates sign a contract to prevent them from leaving and then stealing patients -- at least for a year or two. At the same time, younger doctors are getting savvier about negotiating these agreements or, as a last resort, going to court to win their freedom.

Noncompete clauses, or restrictive covenants as they're sometimes called, prohibit physicians who leave a practice from directly competing for a set time period within a geographic radius.

"The employer legitimately feels that he's made a significant investment in hiring a new associate and doesn't want to see that doctor steal the goodwill the practice has built and siphon off its patients," says Steven M. Harris, a healthcare attorney at McDonald Hopkins law firm in Chicago. "These are highly emotional cases."

From the associate's point of view, noncompete clauses can be punitive, thwart needed competition, and trap a physician who may have been cheated and lied to by the practice. They can effectively stop the doctor from earning a living unless he or she moves great distances.

Noncompete clauses are being used more frequently and for every specialty, says Harris. "In most states, these covenants are enforceable. But generally courts look for reasons not to enforce them." That's because judges believe that more providers will increase competition and help consumers.

Also, many noncompetes are overly broad and restrictive. Courts determine whether the agreement is "reasonable," however vague that term might be.

Doctors No Longer Automatically Accept

"Years ago, most young doctors would just sign the employment agreements, thinking that they had no alternative," says S. Allan Adelman, an attorney at Adelman, Scheff & Smith in Annapolis, Maryland, and former President of the American Health Lawyers Association.

"Today, physicians will contact us for advice before signing," he says. "It's always easier and less stressful to negotiate before you enter into an agreement than to try to litigate a few years later. At this point, everything is negotiable. If a young doctor has a desirable skill or goes into an area where it's hard to recruit, the practice may need him more than he needs it. He's in a better position to negotiate terms such as how long he has to wait before leaving and where he can practice."

The law regarding noncompetes can differ in every state. Eight states -- Alabama, California, Colorado, Delaware, Massachusetts, North Dakota, Tennessee, and Texas -- severely restrict or disallow noncompete clauses entirely.

The American Medical Association opposes noncompete agreements, stating they "restrict competition, disrupt continuity of care, and potentially deprive the public of medical services." AMA discourages any agreement that restricts the right of a physician to practice and considers the clauses unethical if they are excessive in scope.

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