Astute Physician

You’ve searched high and low for your dream job. You’ve interviewed at numerous practices. Today you were offered the position, but for the deal to become official, you must first sign the physician employment contract. Whatever you do, don’t sign the contract until you understand its contents! That may or may not be an easy thing to do, especially if the contract contains a lot of legal jargon. One of the most controversial parts of the physician employment contract is the Restricted Covenant or Covenant Not to Compete. What follows is a primer on Restricted Covenants (taken from the Primer on Employment Contracts by Relief Jones, III, M.D.):

Non-solicitation and Restricted Covenants

The practice will attempt to protect its assets, which includes its staff and patients. Essentially, the practice will want to ascertain that you do not attempt to directly or indirectly lure away employees or patients from the clinic for a specified period of time. This protection will be established in the non-solicitation clause of the contract. The practice has a legitimate right to protect its goodwill and other business interests. The Astute Physician will make sure that the period of time indicated is not excessive. One year is reasonable.

The practice may also throw in some statements regarding the protection of proprietary and confidential information. The definition of proprietary and confidential information can be vague, so be certain to understand what this means from the practice’s standpoint and have it precisely defined in writing in the contract.

You may or may not find a restricted covenant in your contact. This is slightly different from a non-solicitation clause. A restricted covenant is defined as a covenant that obliges a party to avoid or refrain from doing something. Similar to the non-solicitation clause, your ability to recruit patients or staff from the practice will be stymied for a certain time period. The restricted covenant will also attempt to limit your practice of medicine within a specified geographic region. Restricted covenants, also known as covenants not to compete, can be controversial, because they are not enforceable if they do not meet certain common law and/or statutory requirements. If all requirements are not met, then the restricted covenant may not be enforceable. The covenant will only be enforceable to the minimal extent necessary to protect the legitimate interests of the practice. The practice’s goal should not be to drive you out of the city if you stop working for them. The bottom line is that the practice must truly have interests that require protection.

The covenant will typically mention 3 major criteria and it should be reasonable with regard to these 3 criteria. The criteria are the geographic scope of the restriction, the duration of the restriction, and the activity that is restricted. I will now expand on these 3 criteria. If you find that you have a restricted covenant in your contract, you may want to have a good lawyer familiar with restricted covenants in your state to review this section.

First, the geographic area in the restricted covenant will be described as a radius from a location or locations (if the practice owns multiple locations). It may include locations that are not owned, but used by the practice, so be very careful. This radius can best be identified by drawing a circle of the specified radius around each practice location. Don’t confuse this distance with the distance you may see listed in driving instructions from an online map service. The radius listed will typically be larger for specialist as compared to the radius listed for a primary care physician. This makes sense, because there are bound to be fewer specialists within a specified area as compared to generalist. If you live in a densely populated city and see that the radius of the restriction exceeds five miles, a red flag should go up. If your city is small, and you don’t heed this warning, then you may find yourself banned from practicing in your city. Obviously, a smaller radius equates to a better situation for you.

Next, the restricted covenant should not continue for an excessive period of time. Two years is the maximum you should accept, however, the vast majority of individuals would not sign a restricted covenant for greater than a 1 year period. This may be a good time to let your inner negotiator shine. Be Astute!

Finally, the type of activity should be specifically indicated. If you are a specialist or sub-specialist, your restricted covenant should be specific to your specialty or sub-specialty, not the general practice of medicine. For example, if you are an infectious disease specialist and want to have the option to continue practicing general internal medicine, then get it in writing in your contract. You would not be directly competing with your former employer, so there is no reason that the practice should attempt to limit your options in general internal medicine. You could return to doing whatever you wish after the restricted covenant ends.

There are other scenarios in which you would not compete directly with your former employer. For example, I have seen situations where individuals have been able to practice within an academic system, the VA system, or a HMO without breaking the rules of the restricted covenant. This is also reasonable as you would not directly compete with the practice within one of these settings. This is a very important part of your contract, so I will repeat that you should get this spelled out in the contract before any blood spills.

Insider Tip: You may also want to negotiate that the restricted covenant will be void under some circumstances. What are those circumstances? First, if you are terminated without cause, and second, if you leave during the first year for any reason.

In the worst case scenario, you or a future employer may have the right to buy-out your restricted covenant. This is something that should be given some thought, as you would want the price to be reasonable. Laws differ from state to state, so once again, you may want to check with a professional familiar with your state’s laws.

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There are many resources online that provide free information on employment contracts. However, you may find that the information is scattered and incomplete. If you find that you need additional help understanding your physician employment contract, look no further. Physician Employment Contracts Made Easy covers practically all aspects of a physician employment contract. This book will soon be available for purchase in the Apple iStore and on other sites where electronic books are sold.

Physician Employment Contracts Made Easy by Relief Jones, III, M.D. will soon be available for immediate purchase in the Apple iStore and other sites where electronic books are sold.