Summary:
When creating or updating employment contracts, it’s important to carefully review any non-compete provisions as laws vary by state and many have recently changed. Roetzel shareholder Ericka Adler provides guidance to employers in the creation of compliant and enforceable non-complete provisions in their employee contracts.
Click HERE to watch the video blog post.
Video Blog Transcript:
Hi, everyone! I'm Erica Adler, shareholder and leader of the healthcare practice at Roetzel and Andress. Today I want to talk to those healthcare employers out there. If you are preparing a new contract for an employee for your practice, or perhaps you're updating your contracts, you'll want to think very carefully about any non-compete provisions that you may have included.
First, depending on the state that you're sitting in, make sure that non-competes are permitted. There's been a lot of changes in the law, so you do need to make sure that the state where you're sitting does allow non-competes. You also want to confirm if there's been any changes, whether statutory or under case law, that impact the non-compete language that you might include in that agreement.
For example, in Illinois you might need to include notice language having the employee acknowledge that they've had a chance to talk to counsel before signing the agreement. In many states, you might have to offer some type of consideration for the non-compete. So you want to be sure that, depending on the state you're sitting in, whatever you're putting together is as up to date as possible, and if your contracts are out of date that you're adding in these requirements.
Now, in looking at a non-compete, we usually like to focus on geography, scope, and length of time, and the rule of thumb for all of these is what is reasonable. What reasonably protects your practice, and the interest it has in protecting what it's built and shared with an employee who might now be leaving your practice.
First, in terms of geography, think about where patients are really coming from. If all of your patients come from within 3 miles, then 3 miles is likely the right geographic scope for the non-compete. Using 5 miles or 10 miles might be something that a court finds to be too broad and therefore unreasonable, and you don't want to take that chance.
Second, what is the scope of your non-compete? Generally, we want to limit it to either what the employee specifically did for your practice or what the practice does if everyone does the same thing. What we don't really want to do is say that the employee can no longer practice medicine, especially if the employee has the ability to engage in a different type of medicine than what that employee did for your practice or what your practice does. This is important because we want that scope to be reasonable in order to help the non-compete be as enforceable as possible.
Finally, length of time is really important. Generally, the non-competes that I see are one to two years in terms of length of time. Think about what you really need. Is that employee really going to be a threat to your practice after one year? Making it as short as possible will make it less likely for the employee to want to dispute the non-compete with you and may make it more enforceable should the time come to enforce it.
Once you have a non-compete in writing, you may have some back and forth with the employee. It's very common for them to ask for carve-outs, such as not having the non-compete apply if they're terminated without cause, or if the employer has committed a breach. These are reasonable and common requests, but every employer has to evaluate the situation and make those changes that they think are appropriate.
If your employee appears to be violating your non-compete, there are certain steps that can be taken, and I recommend that you talk with your lawyer before doing anything on your own. Typically, these steps include sending a cease and desist letter to the employee and or their potential new employer, who may be helping them violate the contract. But there are also other legal steps that can be taken which certainly can help protect your practice and your right to enforce the terms of that non-compete.
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