Although the following may seem obviously overly broad to some, I have reviewed contracts with the following geographic restrictions, all of which should be considered red flags:
- Prohibition to practice anywhere in the United States;
- Prohibition to practice anywhere in a specific state;
- Prohibition to practice in an area comprised of excessive miles from the current practice location or locations; and
- Prohibition to practice in certain counties.
Please note that exclusion to practice in certain counties may be overly broad in some situations, but may be acceptable in others. For example, a rheumatologist–owner sold his ownership in his practice, and part of the deal required him to agree not to practice throughout Los Angeles County. This particular county restriction would be difficult—if not impossible—for the new physician owner to enforce because Los Angeles County includes over 80 cities and covers over 4,000 square miles.
Is the Durational Scope Reasonable?
A noncompetition clause should identify the length of time in which the physician is prohibited from practicing within the restricted geographic area. Whether the durational scope is reasonable will vary from state to state because it is determined by state law. As a general rule of thumb, if the restricted time frame is two years or less after termination of the contract, the time restriction will likely be considered “reasonable.” However, states vary on whether time restraints in excess of two years are enforceable.
The pitfall most commonly encountered with time restrictions is excessiveness based on the state’s laws and the specific circumstances of the physician and the employer. In negotiating the restricted length of time in a noncompetition clause, it is more common to have a longer time restriction when a physician is selling an ownership interest in a practice than for a physician entering into an employment relationship.
Prospective Employers: What You Need to Know
For prospective employers, great care must be taken by the practice when seeking to hire a physician. States recognize the legal theory of interference with a contract. If an employer is recruiting a rheumatologist who is subject to an employment agreement with a noncompetition clause, the prospective employer must be very careful in the recruiting process. It is recommended that the employment agreement include a representation by the physician–employee that he or she is not subject to any other agreement that would prohibit the physician from entering into the new employment relationship. If a prospective employer is aware of an existing employment contract that contains practice restrictions on a recruited physician, the prospective employer could be held responsible for damages if a dispute arises among the parties.
It’s All in the Words
While it may just seem like semantics, a few words in a contract can significantly change your future. Before you put pen to paper, be sure to have any contract containing a noncompetition clause reviewed by a lawyer who is well versed in your state’s laws. If you have already signed an agreement with a noncompetition clause and you are considering your next career move, a lawyer may be able to shed some light on a seemingly impenetrable clause.
