Can You Break a Noncompete Agreement?

Leigh Page

Disclosures

November 19, 2018

In This Article

Which Doctors Are Most Affected by Noncompetes?

Restrictive covenants against physicians are not in force everywhere. They generally aren't allowed in California, Massachusetts, Colorado, Oregon, Oklahoma, Alabama, New Mexico, North Dakota, Montana, Delaware, and Rhode Island.[7]

However, there are limited instances where they are allowed even in these states, such as when physicians leave partnerships in California.[8]

Where restrictive covenants do exist, it's often impossible to negotiate them out of an employment contract, says Eckerle. "Employers generally don't want to make any exceptions," she says. They tend to think that one or two exceptions would prompt others to ask for exceptions, too.

Employers often say that a major point of the covenant is to protect an investment in a doctor. It's been estimated to cost $250,000 just to recruit a new family physician to replace a departing one.[9]

In addition to affecting employed physicians, restrictive covenants are placed on partners in medical practices and physicians who sell their practices to large systems. They are also placed on joint owners of ambulatory surgery centers, imaging centers, and other ventures, so that they will not leave and open a competing facility.

In these cases, doctors tend to face less sympathetic judges, Eckerle says. The thinking goes that these physicians had more leverage when negotiating these contracts, so they don't merit the kind of protection that employed physicians might get.

Another factor in attempting to break a covenant is the kind of doctor you are. Restrictive covenants affect doctors differently depending on their specialty.

Because the main concern is losing patients, targeting primary care physicians makes the most sense. They have long-term patients, and the goal of the covenant is to make sure they don't take patients with them.

When covenants target specialists, long-term patients aren't the issue; the covenants tend to focus on referral relationships. But Eckerle says preserving referral relationships is usually less successful in court.

For one thing, plaintiffs have to prove that they were responsible for providing referrals to the exiting doctor. In an Illinois case, a gastroenterologist was freed from a covenant imposed by his group practice in part because he could show that he managed his own referrals.[10]

Covenants are used against physicians who don't have their own patients, such as radiologists and anesthesiologists. They are also used against physicians who have patients but couldn't take them away, such as hospitalists and emergency physicians.

The hospitals that contract with these physicians have a hard time enforcing these covenants, according to Richard B. Weinman, an attorney at Winderweedle, Haines, Ward & Woodman in Winter Park, Florida. "The main article of value that physicians take with them is patients," he says, "and these physicians are not taking any patients away."

And yet many of these physicians have been prevented from breaking their covenants. In these cases, plaintiffs may argue that the contract with the physician is a legitimate business interest that must be protected, but this is a weaker argument, Weinman says.

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