A non compete clause is very important to consider when starting your own practice, seeking new employment, or transitioning with a retiring physician.

A physician restrictive covenant, also referred to as a non compete clause or non compete agreement, is a clause or section in a physician’s contract whereby a physician agrees not to engage in his or her chosen profession in competition with a fellow doctor.

A non compete clause can be as narrow as prohibiting the restricted physician from practicing within one square block, or they can be as far reaching as preventing a physician bound by the restriction from practicing medicine within any of the state. (Generally most non compete clauses fall somewhere in between these extremes.)

Can a non compete clause be legally enforced?

The legal enforceability of a physician restrictive covenant varies widely by state, is almost always highly factually based, and frequently relies on a reasonableness standard.

Courts in most states do not favor, and will likely therefore invalidate, any physician restriction agreement that would prohibit a physician from earning a living and supporting a family.

As a general rule, in the United States, a non compete clause is thought to be a restraint of trade and disfavored. However, another principle of contract law holds that if an adult is willing to give up a right by contract, the courts should not stand in the way of freedom to contract, unless the contract violates a statute or public policy.

Courts in most states also want to encourage businesses to operate within their borders and do not want to invalidate agreements entered into by two consenting parties.

Why do physicians sign a non compete clause?

Physicians, particularly those who transfer from some other place, are less likely to have business contacts and patients of their own. Thus, they have  little leverage or power in negotiating the conditions of employment.

For this reason, many physicians are willing to sign any agreement placed in front of them.

On the other side, in order to protect themselves from competition from departing employees, most employment contracts contain some form of non-compete clause (this is assuming non compete clauses are legal within the state) put in place by the doctor who is hiring.

Rather than attempt it alone, physicians would be wise to hire an experienced healthcare attorney to assist with the terms of the agreement.