Source: http://www.cobelaw.com/are-non-competition-agreements-enforceable-or-not
Timestamp: 2019-04-21 10:53:13+00:00

Document:
Non-competition agreements usually bar doctors both from encouraging patients to follow them to a new practice and from practicing medicine for a certain period of time within a certain distance of the current employer’s location.1 Most healthcare practices now use non-competition agreements and other restrictive covenants to shield their patient bases and referral sources from competition when a doctor leaves the practice, but these agreements also have drawbacks. There is much debate in the healthcare and legal communities over the extent to which these non-compete clauses are enforceable – if at all. The truth is that non-competition agreements are sometimes enforceable and sometimes not, depending on their specific restrictions and circumstances.
Employers often consider non-compete clauses as a legitimate condition of employment since a doctor will develop skills, knowledge, and reputation because of his or her association with the employer practice.2 These agreements also serve to protect the employer’s investment in employees by discouraging them from leaving the practice in the first place.3 It seems disingenuous for a doctor to receive the long-term benefits of working in an established practice only to subsequently compete against the practice for the same patients upon leaving.4 Employers may also be concerned about a doctor working with a group solely to develop a patient base and referral sources in order to open his or her own practice.5 Non-competition agreements, along with other restrictive covenants, can alleviate employers’ concerns and prevent this from occurring.
Employers should make sure they attempt to enforce non-competition agreements in a consistent, timely manner. If an employer only enforces the agreements some of the time, a court may refuse to enforce any isolated one.14 Enforcing these non-compete agreements can be problematic, though, since courts construe the agreements narrowly and determine their enforceability on a case-by-case basis, considering all of the attendant circumstances.
The courts outline two factors that make a non-compete clause unreasonable: “(1) the restraint is greater than necessary to protect the employer’s legitimate interest; or (2) if that interest is outweighed by the hardship to the employee and the likely injury to the public.”18 In making the determination of reasonableness, a court will look at all of the circumstances surrounding the non-competition agreement.
The first factor, whether the restraint is greater than necessary to protect the employer’s interest, depends on the scope of the agreement. The scope has two factors of its own: the duration of the agreement and its geographic limitations. Courts will find that the restraint is too great if they think the limitations last too long or cover too great a geographic area.
The second factor, whether the employer’s interest is outweighed by the hardship to the employee and the public, has been the focus of recent Arizona court decisions. In Valley Medical Specialists v. Farber, the Arizona Supreme Court expressed its wariness of non-competition agreements between doctors. The court held that patients are entitled to be seen by the doctor of their choosing, regardless of the contractual obligations between their doctor and his or her former employer, because the harm to patients who could lose the option to see their chosen doctor is greater than the employer’s economic interest in enforcing a non-competition clause.
1. NONCOMPETITION. For the TIME PERIOD set forth in paragraph 2, Employee shall not, directly or indirectly, own, manage, operate, participate in or finance any business venture that competes with the Company within the AREA. . .
Because different courts rule differently on what provisions are overly broad, it is important to have an attorney draft these provisions to ensure that they are not stricken altogether.
The remedies available to an employer when a leaving doctor breaches the non-competition agreement include injunctive relief and money damages. Injunctive relief is usually the most desirable option for the employer, as it allows the employer to immediately stop the competitive behavior before very much damage is done.28 Other forms of relief, such as money damages, may take one to two years or more to realize.29 Injunctions, however, can be the most difficult form of relief to get, as courts consider them an especially extreme form of relief. This does not mean that injunctive relief provisions are always unenforceable. “Although consent to injunctive relief does not guarantee that the relief will be entered by a court, it goes a long way to increasing a court’s comfort level with the remedy.”30 Money damages may be available if the leaving doctor’s breach of the non-compete was the actual cause of the monetary harm to the employer.
Non-competition agreements can be a useful tool for healthcare practices, but making sure those agreements will be enforced can be extremely difficult and requires a high level of precision. On the other hand, a doctor who is struggling to work around a non-compete agreement can rarely know for sure if it is truly enforceable or not, since courts consider each one on a case-by-case basis, considering all of the attendant circumstances. The best way to deal with non-competition agreements is to find an attorney with a thorough understanding of the law regarding these restrictive covenants.
1 Derek W. Loeser, The Legal, Ethical and Practical Implications of Noncompetition Clauses: What Physicians Should Know Before They Sign, 31 J.L. Med. & Ethics 283 (2003).
2 Loeser, supra note 1, at 289.
3 AMA Opinion 9.02 – Restrictive Covenants and the Practice of Medicine.
4 Loeser, supra note 1, at 289.
11 AMA Opinion 9.02 – Restrictive Covenants and the Practice of Medicine.
13 Loeser, supra note 1, at 287.
14 Brent A. Olson and Lisa C. Thompson, Business Law Deskbook § 12:12 (2009-2010 ed.).
15 Id. at § 12:11.
16 Valley Med. Specialists v. Farber, 194 Ariz. 363, 367 (1999) (citing Amex Distrib. Co. v. Mascari, 150 Ariz. 510 (App. 1986)).
17 Id. (citing Harlan M. Blake, Employee Agreements not to Compete, 73 Harv. L. Rev. 625, 647 (1960)).
18 Id. at 369 (citing Restatement (Second) of Contracts § 188 cmt. a).
19 Olson and Thompson, supra note 6, at § 12:11.
20 194 Ariz. at 368 (citing Harlan M. Blake, Employee Agreements not to Compete, 73 Harv. L. Rev. 625, 647 (1960)).
21 Ray K. Harris and Ali J. Farhang, Non-Compete Agreements with Step-Down Provisions: Will Courts in “Blue-Pencil” States Enforce Them?, 23 Computer & Internet Law 3 (July 2006).
22 Harris and Farhang, supra note 21, at 2 (citing Varsity Gold, Inc. v. Porzio, 202 Ariz. 355, 45 P.3d 352 (App. 2002)).
23 Varsity Gold, Inc., 202 Ariz. At 356, 45 P.3d at 358.
24 Loeser, supra note 1, at 285.
25 Harris and Farhang, supra note 21, at 2.
28 Loeser, supra note 1, at 284 .

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