Can You Break a Noncompete Agreement?

Leigh Page

Disclosures

November 19, 2018

In This Article

Potential Legal Defenses to the Restrictive Covenant

Physicians have access to a variety of legal defenses that could encourage the courts to overturn restrictive covenants. Here are some key defenses.

Citing overly broad provisions. Physicians can challenge the noncompete for being too open-ended. "The geographic area can be too wide or the duration can be too long," says Stephanie T. Eckerle, an attorney at Krieg DeVault in Indianapolis, Indiana.

In many states, courts simply strike down overly broad provisions. This has the effect of voiding the noncompete, because it then has no geographic limits at all.

But in many other states, courts can play with the wording of an overly generous clause. They can substitute a realistic geographic limit, as the Indiana court did by changing the 35-county noncompete territory to three counties.[4]

This judicial option, called "blue-penciling," is not good for the departing physician because it ensures that even a sloppily drafted noncompete remains effective.

Physicians providing needed services. Unlike other professions, physicians can cite patients' medical needs as a defense, according to Timothy W. Boden, executive director of Physicians & Surgeons Clinic in Amory, Mississippi, who has written about restrictive covenants.

Rather than letting noncompetes force physicians to leave the noncompete zone, he says courts may overturn noncompetes to make sure a particular service is still available.

Boden says this exemption can apply to primary care physicians in Health Professional Shortage Areas, which are common in Mississippi. But quite often, it is applied to specialists who have skills that few others in the area possess. For example, an Indiana court set aside the covenant for a doctor because he was the only physician in the area who could implant a left ventricular assist device.[4]

Continuity of care for patients. Some courts allow departing physicians to continue a course of treatment for a patient who needs ongoing care, according to says Peter Mavrick, an attorney at Mavrick Law in West Palm Beach, Florida. Mavrick says some Florida courts have not decided on this issue, but Texas law allows continuity of care as a defense against covenants.[5]

Challenging the legitimate business interest. Cantrell says another defense is to attack the employer's purported "legitimate business interest"—its reason for setting aside your right to find new work and forcing you to comply with the covenant.

"You have a better case if you can show that your departure won't hurt your former employer much at all," Cantrell says.

The former employer's business interest can involve the number of patients you'd be taking away, your use of its proprietary patient list, or your use of the employer's "goodwill" (ie, its reputation). If your departure didn't involve any of these things, the judge might decide that the former employer doesn't have a strong claim and might dismiss the case, Cantrell says.

Alleging breach of contract. One common way to try to get out of restrictive covenant is to claim a material (ie, significant) breach of any part of the contract, which would void the whole covenant.

"A material breach could be a wrongful termination or a significant underpayment of a promised amount," Eckerle says. Other attorneys say it could also involve a poor work environment or significant clinical errors.

When Maeve O'Connor, MD, an allergist in Charlotte, North Carolina, was sued by her former group practice for breaking her restrictive covenant, she alleged that the group had significant clinical errors that endangered patients, and that it failed to provide her with staff "reasonably necessary" to do her job, according to a newspaper account.[6]

The group practice adamantly denied these charges, but the judge refused to grant it a preliminary injunction. Shortly after the decision, O'Connor reached a settlement that cannot be discussed, according to a conversation with O'Connor's practice manager.

Cantrell says settlements of these cases usually come directly before or after the judge's decision on the preliminary injunction. At this point, uncertainties of the case have been clarified, and one party or the other realizes that it will be hard to prevail and wants to settle, he says.

Bad publicity. Defendants can often bring the plaintiff to the bargaining table simply by citing some potentially bad publicity, such as a sexual harassment case or harassment of a whistleblower, according to Cantrell.

"Large organizations really don't like bad publicity," he says. Even if these issues have nothing to do with breach of contract, "they might influence the judge to view the situation differently."

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