When a Doctor Needs a Lawyer: Non-Compete Agreements and Restrictive Covenants
Consulting legal counsel to review a physician’s employment agreement before a dispute arises may increase a doctor’s negotiating power and help obtain better working conditions. Employment agreements contain many provisions, which may include: compensation arrangements, arbitration clauses, terms defining the scope of liability insurance, and non-compete agreements. As physicians in the workplace are tending to move away from working in solo practices, we are finding that hospital, health system and other corporate employment agreements containing non-compete clauses are becoming more prevalent.
The American Medical Association advises against physicians entering into restrictive non-compete agreements, saying that they “can disrupt continuity of care, and may limit access to care.”. While the AMA advises physicians to be cautious about unreasonable restrictions and those that limit patient choice of providers, generally speaking, non-compete agreements have been upheld and determined enforceable in courts. Courts can limit the enforcement of these agreements, however, if they deem the provisions unreasonable or too restrictive. Courts have varied in what they define as unreasonable or overly restrictive, in terms of duration and geographic radius.
Non-compete clauses often contain geographic limitations, limiting a provider’s ability to practice medicine within a certain area for a designated period of time. Traditionally, those provisions were drafted broadly. For example, in the past, often after the end of the employment relationship, a physician agreed not to practice medicine within 10-15 miles of the former employer. Today, in contrast, as telemedicine and mergers have created broader healthcare networks and complicated the concept of what constitutes a geographic radius, the trend in non-compete clauses is a more limited scope. Narrow restrictive terms often create more workable boundaries for physicians. Today’s boundaries may still allow healthcare providers to continue to practice within their communities, with limitations on the entities with which the physician can be employed. Physicians who violate non-compete agreements are subject to litigation by their previous employer, if the employment contract is determined to be valid in court.
In April of 2018, ninety-two doctors joined in litigation against Atrium Health, because their employment contracts barred them from being able to create a standalone practice. The lawsuit was one of the largest litigation efforts involving hospital non-compete clauses within physician contracts. In that matter, the physicians challenged their non-compete agreement clauses as overly broad, as they prevented the providers from doing any medical work in the Charlotte area for a year, and allegedly mandated patient referrals to Atrium facilities. The lawsuit was settled in July 2018, with Atrium allowing the medical group to become independent by September of that year.
In the Atrium case, the court looked at the unique language within the contract to make its determination. Since every contract is different, it is important for a physician considering non-compete provisions and other restrictive covenants to consult with legal counsel to ensure awareness of limitations created, ideally before signing the agreement. As a healthcare provider, if you have signed an employment agreement containing a non-compete agreement or other restrictive terms, be sure to understand these terms fully before opting to start a new practice or going to work for another employer.
If you are a healthcare provider who has signed an employment agreement, your next career move to work for a different healthcare network or to establish a standalone practice could violate a non-compete clause in your existing employment contract. Remember: When a doctor signs an employment agreement without consulting legal counsel, he or she may miss out on helpful guidance, proposals, and negotiating tactics. As healthcare networks expand, increasing the complexity and scope of non-compete agreements, consulting an attorney for advice and to better understand these terms is invaluable. In our Georgia and South Carolina based firm, we work with physicians in negotiating their employment contracts and counsel healthcare providers through the complex framework created by restrictive covenants. With the help of legal counsel, negotiating a contract before agreeing to its terms can put providers and employers in a position of confidence to fully understand and better comply with non-compete provisions in the agreement.
* Disclaimer: Thoughts shared here do not constitute legal advice. Please consult with an attorney to discuss your legal issue.