Non-compete clauses are common in employment contracts for many different professions. However, they are especially prevalent for jobs that require interfacing directly with customers, clients, or in a physician’s case, patients. This is because non-competes are primarily designed to preserve an employer’s customer base. While non-compete clauses may succeed in that aspect, they are often too restrictive toward employees, or physicians, in the process. As a physician, it is likely you will discover a non-compete in your employment contract at some point, if you have not already. These clauses have the potential to disrupt your entire career, so it is crucial to understand what they mean and negotiate them if possible.
What is a non-compete?
A non-compete clause, also known as a type of restrictive covenant, limits your ability to work for a competitor within a specific radius of your employer’s location(s) for a designated period after leaving your existing job. For example, a non-compete might prevent you from working for any other practice within 15 miles of your current employer for 2 years after leaving your current position. This restriction only kicks in if you resign or switch jobs, but it can have significant repercussions when that time comes.
Employers use non-competes to prevent you from leaving to work for another nearby employer and taking patients, staff, or sensitive company information with you in the process. An argument can be made that non-competes are necessary to protect employers’ interests. Although, most of the clauses are overly harsh, covering large areas and lasting for long periods of time, among other issues.
What makes non-competes problematic?
The effects of a non-compete clause are not often seen until later in your employment, but that can make them even more dangerous. When you are accepting a new job, especially if it is your first attending position, it is easy to neglect a non-compete because it does not immediately apply to you. It is also common to believe the non-compete will never become a problem, because you are accepting your dream job and are unlikely to leave any time soon, if at all. Unfortunately, around half of physicians change jobs within their first 2 years of employment. Even the best jobs can take a turn for the worst due to unforeseen circumstances, and it is always best to prepare for the worst-case scenario.
Typically, a non-compete becomes problematic when you need to leave a job but do not want to change your location. If your non-compete encompasses a large area around your employer, you may find yourself with nowhere else to go within the immediate vicinity. Particularly in dense metropolitan areas, just 10 or 15 miles can cover a lot of other practices. The situation is made even worse if your non-compete terms apply to multiple or all your employer’s locations. If you work for a large health system with at least a few separate offices or hospitals, and you cannot go to work for a competitor within 15 miles of each location, you might need to move to an entirely different city to escape a job. In this way, non-competes can effectively trap physicians in jobs they no longer want, unless they are willing to relocate entirely.
The current discussion around non-competes
The ethical and legal aspects of non-competes have been subjected to ongoing debate, but the discussion has been particularly prominent this year. In early 2023, the Federal Trade Commission (FTC) proposed a rule which would potentially ban all employers from placing non-compete clauses in employment contracts. The FTC was expected to vote on the rule this year, but after a huge wave of public comments both for and against the rule, voting was postponed until 2024. While a nationwide ban is still undecided, there are some states where non-competes are currently limited or completely unenforceable.
States like Oklahoma, California, and North Dakota have taken the step of completely banning non-competes. Meanwhile, other states have imposed limitations or bans on non-competes based on specific criteria, such as profession or income level. For example, Massachusetts prohibits non-competes in physician contracts, but the clauses may still be allowed for other professions. Conversely, Washington, D.C. has all but completely banned non-competes, but the clauses can still be used against “medical specialists” earning above a specified income level.
A nationwide ban on non-competes would allow physicians and other employees to change jobs more easily, letting them accept positions offering higher pay. In turn, this would increase earnings across the board. In a January 2023 press release, the FTC estimated that overall employee earnings could rise by approximately $300 billion, and racial/gender pay gaps could be reduced by as much as 9.1%. Without non-competes, employers would be forced to make more competitive offers to attract or retain employees.
Negotiating a non-compete
While the jury is still out on a comprehensive non-compete ban, you are likely to find a non-compete clause in your employment contract. As your first action, research any laws concerning non-competes in the state you will be employed. Also, contact an attorney with experience in physician contracts who can help you determine whether the non-compete is enforceable or not. It might sound unusual, but even in states where non-competes are restricted or prohibited, employers will still try to include these clauses in their contracts.
While you are determining the validity of a non-compete, consider how it relates to your specialty as well. If you are a specialist without strong ties to recurring patients, a non-compete is particularly excessive. For anesthesiologists, radiologists, emergency physicians, and other specialists, an employer should not have to worry so much about you poaching patients when you leave, because you typically do not have ongoing relationships with many of them. This is a good point to bring up in negotiations when attempting to have a non-compete removed from your contract.
If you will be working in a state where a non-compete is allowed, it is still best to try negotiating the terms. If you cannot have them removed completely, at least try to have the radius and/or timeframe of effectiveness reduced. A non-compete that affects a 10-mile radius around your employer for 1 year is still better than one that covers a 15-mile radius for 2 years. It is also highly recommended to limit the locations to which your non-compete applies. If the clause applies to all your employer’s locations, ask for the scope to be limited to only the location at which you practice.
As with many other terms in your contract, the best time to negotiate a non-compete is before you ever sign on the dotted line. Even though a non-compete will not affect you until you leave, and that may be years from now, prevention will save you a lot of headaches in the future. There is still hope that non-competes will be banned outright, but until then, always check your contract for such clauses, understand how they could affect your career, and negotiate them when possible.
If you are concerned about a non-compete in your contract, Resolve can help you understand how the clause affects you and negotiate if necessary. Resolve is the #1 rated physician contract review and negotiation firm in the nation, and they will make sure your contract treats you fairly. Connect with an experienced attorney who will take your priorities into account, identify red flags in your contract, and even negotiate on your behalf.