Can You Break a Noncompete Agreement?

Leigh Page

Disclosures

November 19, 2018

In This Article

Can You Be Hired if You'd Be Breaking Your Covenant?

If you want a new job, would it be wise to look for one that is inside the territory of your noncompete?

Adler says no. "No employer wants to hire someone who's not in compliance," she says. If you're ultimately prevented from taking the new job, your new employer would be left with a signed contract and an empty position, she says.

Moreover, your old employer may sue your new employer for tortious interference with its contract. But Mavrick says the new employer's risk of losing such a lawsuit is quite low.

"Your former employer would have to prove that your new employer intentionally lured you away from the old job," he says. "Simply knowing that you might be violating the old contract would not be enough to implicate the new employer."

Mavrick even thinks that some employers would overlook your risk of violating the covenant and would hire you. "If they really want you, they might be willing to put their concerns aside," he says.

In any case, it's important to be honest with prospective employers about your covenant and let them know the basic provisions, Adler says. But don't share the actual contract with them, she says, because it may be confidential.

Expect to Be Challenged

Some departing physicians think they can break a restrictive covenant and no one will notice. Indeed, sometimes a physician leaves and nothing happens, but that doesn't mean that no one noticed, Adler says. The former employer may have taken a look into the case and decided it wasn't a major threat. But this is rare, she says.

More likely, the former employer will send the physician a "cease and desist" letter, which is a warning shot before filing a lawsuit. Adler says you can expect the letter within days or weeks of breaking the covenant, but it could arrive at any time up until the covenant expires. That means you can never be sure you're off the hook.

The letter in effect orders the physician to drop the new job, but that's very hard to do at this point. The physician has already signed employment papers or, in the case of opening a new practice, has already rented space and hired staff.

Sometimes physicians simply ignore the cease and desist letter, which Cantrell, the Tampa attorney, says is a very bad idea.

He represented a hospital against a pediatrician who left the hospital and set up a practice just within the geographic limit of the noncompete. "She was easy to find out because she put out fliers and emails about the new practice," he recalls. "I sent her a cease and desist letter, but she didn't respond. Well, she ended up paying a lot of money."

Cantrell says not responding to a cease and desist letter tells your former employer that you're probably in violation. "If you didn't think so, you would answer and explain why," he says.

Going to Court

When the cease and desist letter comes, Cantrell agrees with Pollard, the Fort Lauderdale attorney in the video, that physicians should consider suing their former employers before they can sue you.

"Suing them lets you frame the narrative of the dispute and choose the jurisdiction," he says. "But it costs you more money."

When former employers file suit, their first step is to ask for a preliminary injunction, which, if granted, would force defendants to stop their new job while the case continues.

The preliminary injunction usually comes within a month of filing the lawsuit. It is a potent tool to force doctors to capitulate, because they would be out of a job while the case is resolved, which could take months or even years, according to Cantrell.

On the other hand, if the preliminary injunction is not granted, it is a sign that the plaintiff does not have a strong case, Cantrell says. For this reason, many settlements occur just before or just after the judge's decision preliminary injunction hearing, he says.

When physicians do not have a strong case, they have to make concessions in the settlement agreement, such as paying an amount to the other side (eg, a year or two of wages), or limit their practice (eg, promising not to treat former patients).

"In the settlement, the doctor pays money, makes promises, or both," Cantrell says.

Conclusion

It would be foolhardy to simply ignore restrictive covenants. Former employers and partnerships tend to enforce them, and in many states, the courts tend to uphold their cases. Physicians who lose often have to pay a great deal of money to get out of them.

To get out of a covenant, you will need the help of a seasoned attorney, and even then, there is no guarantee you would prevail. Courts are highly enigmatic in this area of the law.

Still, physicians can potentially defeat a covenant in many different ways. Successful strategies include everything from aggressive defenses against former employers to working with them to hammer out a solution.

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