6 Ways to Free Yourself From a Noncompete Agreement

Mark Crane

Disclosures

September 29, 2011

In This Article

Why Courts Disallow Noncompetes

Courts will often strike down restrictive covenants if they are too broad, inconsistently applied, or limit patient choice. Here are some examples:

1. Overly broad. A noncompete clause might bar a physician who leaves the practice from engaging in the same specialty within 30 miles of his employer for a period of 2 years. That may be reasonable in some locales but not in metropolitan areas where 1 million patients may live within that radius.

"If a contract said 100 miles, almost all courts would deem that unreasonable," says Adelman. "The same goes for a restriction of 5 years. A year or 2 at most is more common. Some courts will rewrite the agreement to 1 year while others will overturn it entirely. Some practices may have satellite offices over a large area. The physician should negotiate up front to make sure the geographic limitations apply only to the office where he usually works."

Severe restrictions on what procedures a doctor performs also are likely to be overturned. A practice might prevent a departing physician from performing certain procedures for a set time but cannot stop him from engaging in other aspects of medical practice.

2. The employer reneges. An agreement may promise the associate a certain level of income, a bonus, or a buy-in arrangement. Then the employer fails to deliver. Courts will often throw out a noncompete clause in this scenario because the employer has already violated the agreement.

For example, an Indiana appeals court found that a cardiology group had reneged on its promise to 2 physicians when it didn't process patient billings in a timely manner. That breach rendered the noncompete portion of the agreement as unenforceable.

3. The noncompete violates public policy. A physician may demonstrate that patients would suffer harm if a noncompete is enforced, especially in medically underserved areas. For example, patients might be forced to travel great distances to receive care. Most courts would deem the public interest in retaining the services of the doctor to be greater than enforcing a contract.

The Tennessee Supreme Court in 2006 declared that an internist's noncompete agreement was invalid because a patient's right to receive continued care from his physician outweighed a medical center's business interest. "The right of a person to choose the physician that he or she believes is best able to provide treatment is so fundamental that we cannot allow it to be denied because of an employer's restrictive covenant," the court held.

4. The doctor is unfairly terminated. Many courts will refuse to enforce a noncompete clause if you were fired without good cause. In several states, this is a matter of law. As one court put it, "The employer who fires an employee for failing to perform in a manner that promotes the employer's business interests deems the employee worthless. ... It is unreasonable as a matter of law to permit the employer to retain unfettered control over that which it has effectively discarded as worthless to its legitimate business interests."

"Some practices don't act in good faith," notes Adelman. "They'll give the associate unreasonable assignments, such as being on call every weekend. They effectively force him to resign and then try to enforce a noncompete clause. Courts call this 'constructive discharge,' meaning that by their behavior, the practice terminated the doctor. Courts aren't likely to enforce the noncompete in this situation."

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