You started a medical practice and, through the years, have developed policies, procedures, strategies, work products, client relationships and confidential information that are specific to your practice and its success. As your practice grows, you know you will need to hire more employees. You also understand, however, that any potential employee may pose a risk to your business, because each employee will be exposed to the confidential or proprietary information and practices you have developed and compiled as you have built your business. One way to protect your practice is to execute an employment contract with each new employee, one that outlines certain requirements, covenants and representations.
This agreement will memorialize the understanding of both parties regarding what the position entails and the responsibilities of both the employer and the employee. To prevent your ideas and information from being taken by an employee to a competitor’s practice, you may want to include restrictive covenants in the employee agreement.
Restrictive covenants can be essential to protect a practice. Specific examples of restrictive covenants in an employment context are non-competition and non-solicitation provisions. Non-competition provisions outline where an employee is prohibited from practicing if that employee chooses to end his or her relationship with an employer. Non-solicitation provisions prohibit a former employee from soliciting employees for a successor practice. Drafting these types of provisions in a deliberate, reasonable way is critical to ensuring enforceability.
How Are Non-Competes Analyzed by Courts?
Non-compete clauses are somewhat common in employment contracts. Their purpose is to protect an employer from unfair competition by preventing former employees from using strategies and information developed by a practice at a subsequent place of employment. These provisions also prohibit individuals who leave a practice from soliciting patients to move with the employee to a new practice, and prohibit employees from soliciting the former practice’s referral sources. Non-competition provisions help curtail the movement of this information from a practice to its competitor by limiting where, and when, employees can work after their relationship with a current employer ends.
Non-compete clauses … protect an employer from unfair competition by preventing former employees from using strategies & information developed by a practice at a subsequent place of employment.
Courts want to make sure that restrictive covenants, such as non-competition and non-solicitation clauses, are reasonable and do not impose an unnecessary restriction on trade. To do this, they will often look at a few factors when determining whether a given covenant is enforceable: the function of the covenant, the geographic scope of the covenant and the duration of the covenant. When examining restrictive covenants, courts will also want to ensure that the covenant:
- Is narrowly written to protect an employer’s legitimate business interests;
- Is not unduly burdensome on the employee; and
- Does not violate public policy.
Courts do not want employees to be completely restricted from working in their field. This would be against public policy. Instead, non-competition clauses are meant to keep former employees from being able to work at a similar practice where that employee could possibly use information, strategies or referral sources or treat patients from its previous practice to gain an unfair advantage in the marketplace.