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How Does a Non-Compete Provision In My Physician Contract Affect Me?

by  |  Physician Practices

Congratulations–you’ve got the job! While you may be excited to start your new position and ready to sign on the dotted line, it is important to exercise caution and see what the contract actually says before signing it. Although most prospective employees do not receive attorney advice before signing an employment contract, it is important for physicians to have their physician employment agreement reviewed by an attorney. This is because there are often provisions in the contract that, if not negotiated or eliminated, can be very costly or restrictive to a physician down the road. One sort of provision that a physician should fully understand before agreeing to is a non-compete provision. Non-competes have gotten a lot of attention recently in the media, but it can still be confusing to understand what they are and how they might affect a physician. 

What is a Non-Compete Provision?

A non-compete provision–otherwise known as a non-competition clause or covenant not to compete–is a contractual agreement between an employer and an employee or a business entity and a contractor or partner. This sort of provision restricts the employee or party from engaging in activities that “compete” with the employer or contracting entity for a specified period of time and within a defined geographical area after the termination of employment or business relationship. They will outline specific activities or industries that the individual or entity is prohibited from engaging in and/or with.

Why Do Non-Compete Provisions Exist?

Despite a movement against non-compete provisions on the national and state levels, there are legitimate reasons for the existence of non-compete provisions. The purpose of non-compete provisions is to protect an employer’s or contracting entity’s business interests from being exploited by former employees or partners who might use their insider knowledge to compete unfairly. This includes proprietary information, trade secrets, and client relationships.

Non-compete agreements appear to make sense in the context of trade secrets. Physicians may simply assume that they would not apply to doctors. However, there are non-compete provisions in many physician employment contracts. Rather than trying to protect proprietary information, these provisions are in effect to prevent doctors from leaving a practice and going over to a competitor. This is because, as you are aware, there is a national physician shortage. According to the American Medical Association, an estimated 83 million Americans live without sufficient access to a primary care physician. Employers, then, will do what they can to retain quality physicians. 

How Do Non-Compete Provisions Affect Physicians?

Non-compete provisions in physicians’ employment contracts can vary in content, but many of them restrict the physician from working in a certain geographic area for a certain amount of time after no longer working for the employer. There are also often prohibitions against “moonlighting” in the contract.

According to the American Medical Association, close to half of all doctors are affected by non-compete provisions. The organization has backed an effort to ban most physician non-compete provisions, asserting that the provisions limit career advancement, particularly for those starting out their careers, and restrict them from providing care in vulnerable communities, which further limits patients’ access to healthcare.

Are Non-Compete Provisions Enforceable?

Whether non-compete provisions are enforceable varies depending on jurisdiction and specific circumstances. The enforceability of non-compete provisions has been on the chopping block federally and in various states. In fact, the FTC recently ruled to ban nearly all noncompetes. Nevertheless, they are often enforceable, depending on the facts of the case. For instance, in 2022, Georgia’s Statewide Business Court struck down a non-compete provision that lacked geographic restrictions. Although that provision prohibited the physician from practicing within a two-mile radius of a certain practice area; however, the practice area was left blank.

There is no guarantee that the non-compete provision in your employment contract will be enforceable or not. Your employment contract will be governed by state law, so the trial court will look at the terms of the contract in light of what is required by statute. One of the things that the court will look at is whether the provision, as written, is necessary to protect a legitimate business interest. Additionally, the court will consider any undue hardship to the physician. In determining whether there is undue hardship, the court will look at things like the duration of the agreement, the geographic scope, and what activities are prohibited. If the contract is unreasonable, there is a good chance that the court will find it unenforceable.

Do I Have to Accept a Non-compete Provision?

The simple answer to this is “no.” You are not obligated to sign any contract with which you are not comfortable. However, you will be assured that non-compete provisions are “standard” and “not a big deal.” Simply because they are commonplace does not mean that your contract has to include one. This is why it is important to review your contract with an attorney, if possible, before signing so that you can negotiate. Physician contract review attorneys are familiar with contract terms and can help you exclude unfavorable provisions and include favorable ones. Of course, your employer will have to agree to the contract. Still, being represented in the contract process will give you greater leverage to avoid provisions that are detrimental to you. 

Contact a Seasoned Physician Contract Review Attorney 

Despite what the person sitting across the table from you as you are reviewing your contract will tell you, non-compete provisions are “a big deal.” They can greatly restrict where you practice, when you practice, and what you practice for a considerable chunk of the future. Not only will this possibly cause you to leave money on the table, but it can seriously affect your personal life. Do not overlook non-compete provisions. Before you sign, contact a seasoned physician contract review attorney. If you have already signed, all is not lost. There may be justification to revise your employment contract. A physician contract attorney can help you with that as well.

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