A 10-mile non-compete would be considered reasonable and enforceable in most states. A non-competition clause for a physician is a legally binding clause prohibiting the physician from working within a defined geographic area for a specific period. Knowing how to negotiate a physician employment contract is essential when entering into these contracts.
Examples of Physician Non-Competition Clauses
- Prohibited from working within their specialty for 1 year within 10 miles of their primary practice location.
- Prohibited from providing care within any board-certified areas of medicine for 2 years within 10 miles from any location of the employer.
- Prohibited from any practice of medicine within a specific county for 1 year.
What Is a Reasonable Geographic Practice Restriction?
Rural Practice Location: The geographic restriction for a practice located in a rural area will customarily be larger than that of a practice in a larger city. 15-50 miles could be considered reasonable.
Urban Practice Location: The geographic restriction for a practice located in a larger city may be considered reasonable from 2-15 miles.
Breaking an Agreement With a No-Competition Clause
Physicians with non-competition agreements in their contracts were initially considered as restraints of trade and thus were invalid on the grounds of public policy at common law; however, many restrictions of trade incident to contracts were upheld based on the rule of reason. Thus, restrictive covenants between dentists not to compete after the termination of employment are generally enforceable as long as it is reasonable.
However, there are a few states which prohibit non-compete clauses. Please review your state laws for non-compete rules and regulations to see the specific rules for your state. The National Conference of State Legislatures website is a valuable resource for this.
The general test for reasonableness of these clauses holds that on termination of employment, a covenant that restrains an employee from competing with his former employer is reasonable if:
- The restraint is not more than required to protect the employer,
- It does not inflict any untold hardships on the employer, and
- The restraint is not injurious to the public.
No Competition for New Employees
For instance, in Ohio, a non-competition clause with a business was considered unreasonable after judicial review when it was noted that a provider’s sub-specialty was uncommon and that it would be harsh if the restrictive covenant were enforced as the hospital where he was precluded from practicing was only one of the few institutions in the area where he could practice his specialty.
Thus, in Ohio, covenants restraining providers from competing with their employer upon termination are considered unreasonable if it inflicts hardship on the doctor, is injurious to the public, if the demand for the doctor’s health care expertise is vital for the community people and if the doctor’s services are essential for the health, care, and treatment of the public. However, non-competition clauses for doctors, in general, are enforceable as long as they protect some of the employer’s legitimate interests. Having a non-compete review by a lawyer can assist in avoiding legal issues.
When Employer Can Enforce
Many ask, are non-compete agreements enforceable by a business? The contract is enforceable as long as a non-compete is written well and serves the employer’s interests, not broader than necessary. Many myths have come about regarding non-compete agreements, and it is much better to be safe and sure about any agreement you are signing as an employee.
It’s worth consulting with the American Medical Association for further guidelines.
Non-Competition Agreements That Are Too Restrictive
Some non-compete agreements are very restrictive. It can mean either the state will limit the enforceability of the agreement, or if fully enforced, the employee may find it almost impossible to get work in the field after leaving that job. Non-compete agreements can stop a person from working in the same industry that he just left. It can mean they can’t find a similar job with comparable pay in a specific geographic area after years of education and learning skills. It is where considering physician alternative careers may become necessary.
Without properly written and phrased non-competes, professionals won’t be able to find work or change employers when needed freely. A non-compete agreement has real-life consequences.
When Courts Won’t Enforce a Non-Competition Clause From a Business or Hospital
Whenever a non-compete is signed, there has to be something of value given to the employee in exchange for signing the agreement. An exchange of value for a newly hired employee is typical that he is being hired for the job. For employees who have already been hired, some other consideration of value must be made, or the non-compete can’t be enforced. The courts also won’t enforce an agreement when it restricts the competition for too long. Usually, six months is considered normal. It could vary from business to business. The courts may not enforce non-compete agreements if they restrict someone from working in a large territory. The towns, counties, or cities are often listed, but if too wide an area, it would be unfair and therefore not enforceable.
Physician Employment Agreement Review
Contracts are a pervasive and obligatory part of nearly all company and legal transactions. Well-drafted contracts help to enumerate the responsibilities of the involved parties, divide liabilities, protect legal rights, and ensure future relationship statuses. These touchstones are even more crucial when applying their roles to the case of a provider employed by a hospital, medical group, or other health care provider. While contract drafting and negotiation can be long and arduous, legal representation is a must to protect your rights.
The present-day conclusion is simple: A provider should only enter into a contract with the agreement reviewed by legal counsel.
There is too much at risk for a provider to take contract matters into their own hands. In addition to the specific professional implications, contract terms can significantly impact a provider’s family, lifestyle, and future. There are many essential contract terms and clauses which can present complex and diverse issues for any provider, including:
- Non-compete clauses
- Verbal guarantees
- Insurance statements
Additionally, often the most influential terms and clauses in any employment contract are the ones that are not present. With the advent of productivity-based employment agreements, any provider must review an employment agreement before it is executed. Attorney Robert Chelle has practical experience drafting and reviewing provider contracts for nearly every specialty.
A thorough contract review can benefit new residents, attending doctors, doctors entering their first employment contract, or established doctors looking for new employment. By employing an experienced attorney for your representation, you can ensure that you will be able to fully understand the extensive and complex wording included in your contract. By having a complete understanding of the contract, you will be in a better position to decide whether or not you want to enter into the agreement, which will affect your career life for years to come.
The financial benefits gained from having your contract reviewed and negotiated by an experienced healthcare attorney far outweigh the costs of a review. You are a valuable resource, and you should be treated and respected as such. Attorney Robert Chelle will personally dedicate his time to ensure you are fully protected and will assist you in the contract process to represent your interests fairly.
Every contract is unique. However, nearly all contracts for health care providers should contain several essential terms. If these essential terms are not spelled out in contracts, disputes can arise when there is a disagreement between the parties regarding the details of the specific term. For instance, if the provider expects to work Monday through Thursday and the employer expects the provider to work Monday through Friday. Still, the specific workdays need to be included in the agreement. Who prevails?
Physician Contract Checklist
Spelling out the details of your job is crucial to avoid contract conflicts during the term of your employment. Below is a checklist of essential words that contracts should contain (and a brief explanation of each term):
- Practice Services Offered: What are the clinical patient care duties? Are you given time for a review of administrative tasks? How many patients are you expected to see (like in pediatrics)?
- Outside Activities: Are you permitted to pursue moonlighting or locum tenens opportunities? Do you need permission from the employer before you accept those practice of medicine-related positions?
- Practice Call Schedule: How often are you on call (after-hours office call, hospital call (if applicable))?
- Base Compensation: What is the annual base salary? What is the pay period frequency? Does the base compensation increase over the term of the agreement? Is there an annual review or quarterly review of compensation?
- Productivity Compensation: If there is productivity compensation, how is it calculated (wRVU, net collections, patient encounters, etc.)? Is there an annual review?
- Paid Time Off: How much time off does the job offer? What is the split between vacation, sick days, CME attendance, and holidays? Is there an HR guide?
- Continuing Medical Education (CME): What is the annual allowance for CME expenses, and how much time off is offered?
- Dues and Fees: Which financial expenses are covered (board licensing, DEA registration, privileging, AMA membership, Board review)?
- Relocation Assistance: Is relocation assistance offered? What are the repayment obligations if the agreement is terminated before the expiration of the initial term?
- Signing Bonus: Is an employee signing bonus offered? When is it paid? Do you have to pay it back if you leave before the initial term is completed? Are student loans paid back? Is there a forgiveness period for student loans?
- Professional Liability Insurance: What type of liability insurance (malpractice) is offered: claims made, occurrence, self-insurance?
- Tail Insurance: If tail insurance is necessary, who will pay for it when the agreement is terminated?
- Without Cause Termination: How much notice is required for either party to terminate the agreement without cause?
- Practice Post-Termination Payment Obligations: Will you receive production bonuses after terminating the agreement?
- Non-Compete: How long does the non-compete last, and what is the prohibited geographic scope?
- Financial Retirement: Is a financial retirement plan offered?
- Non-Solicitation: How long does it last, and does it cover employees, patients, and business associates?
- Notice: How is the notice given? Via hand delivery, email, US mail, etc.? Does it have to be provided to the employer’s attorney?
- Practice Assignment: Can the employer assign the Agreement?
- Alternative Dispute Resolution: If there is a conflict regarding the contract, will mediation or arbitration be utilized? What is the standard attorney review process for conflict? Who decides which attorney oversees the process?
If you have questions about claims-made or occurrence coverage and your current malpractice insurance or want your employment agreement reviewed, contact Chelle Law today.
We are committed experts in the field of Physician Contract Review, proudly serving the medical community through our platform at Physician Contract Review. With a profound understanding of the healthcare industry’s complexities, we provide comprehensive contract review services tailored to meet the unique needs of physicians. Our team of experienced legal professionals is dedicated to ensuring that every aspect of your contract is clear, fair, and beneficial to your career. To learn more about our services or to book a review, please contact us today.