Validity of Noncompete Clauses in Physicians' Contracts
Validity of Noncompete Clauses in Physicians' Contracts
Many physicians' employment agreements contain covenants not to compete. In general, noncompete covenants in physicians' contracts require the physician to agree not to compete with his or her employer for a certain period of time within a certain geographical area. Ordinarily, noncompete covenants in employment contracts will be upheld if they are not too broad in time or in area. Courts often apply different analyses to noncompete agreements in physicians' contracts in consideration of public policy concerns.
In order for a noncompete agreement to be valid, it, like all contracts, must be supported by adequate consideration. There is no clear answer as to what constitutes adequate consideration. Whether an offer of employment alone is sufficient consideration for the noncompete agreement often depends on the circumstances of the case. Courts, therefore, in construing noncompete agreements look to the facts surrounding each contract to determine whether adequate consideration was given.
What constitutes a reasonable period of time for a noncompete covenant varies depending on the circumstances of the particular contract as well as on state law. For instance, under Florida law, a six-month period in a noncompete agreement is presumed reasonable and a period longer than two years is presumed unreasonable. In some other states, any noncompete agreement longer than two years is presumed unreasonable. Still other states have found noncompete agreements as long as five years reasonable. Geographic limitations in noncompete agreements also must be reasonable to be enforceable. Often, the reasonability of the geographic scope of a noncompete agreement will depend on the physician's specialty. For example, if the physician's patients come from a wide geographic area, a broader geographic restriction would be more likely to be upheld.
Under Delaware law, any covenant not to compete provision of an employment, partnership or corporate agreement among physicians that restricts the right of a physician to practice medicine in a particular locale and/or for a defined period of time, upon the termination of the agreement, is void. However, the Delaware law does provide that physicians who breach noncompete provisions of their contracts may still be liable for damages. Likewise, Colorado will not enforce a noncompete agreement banning a physician from practicing medicine in a particular area. On the contrary, Florida courts have determined that agreements restricting physicians from competition are not automatically unenforceable.
Courts that refuse to uphold a noncompete agreement in a physician's contract often do so on the grounds that enforcement would violate public policy because it is contrary to public health and safety to limit the availability of physicians in an area. For example, North Carolina courts apply a two-part test to physicians' noncompete agreements to determine whether the agreement violates public policy. Under the test, covenants not to compete are unenforceable where the physician is one of only two or three specialists in the community or where enforcement of the physician's covenant would allow another physician to have a monopoly and charge higher fees for medical services. Courts that strike down physicians' noncompete agreements also rest their decisions on the importance of the doctor/patient relationship and patients' right to choose their medical care providers.
