JACR: Untangling noncompete clause mysteries

Noncompetition covenants (noncompetes) haunt radiologists throughout their careers, and require meticulous legal advice, posed an article in the July issue of Journal of American College of Radiology. However, confusion need not reign supreme.

There are eight basics about noncompete clauses, according to Roy W. Breitenbach, a healthcare attorney with Garfunkel Wild in Great Neck, N.Y. Breitenbach detailed the eight basics of noncompetition covenants. These are:

1. Noncompete vs. nonsolicitation: A noncompete agreement between a physician and practice prohibits a radiologist from practicing within a defined geographic area surrounding the practice if the physician leaves the practice. A nonsolicitation covenant restricts the radiologist from soliciting the practice’s patients.
2. Enforceability: Three states (Colorado, Delaware and Massachusetts) refuse to enforce noncompetes involving physicians, and nine others are reluctant to enforce them. “What may be true in one jurisdiction may not be true in others. Be careful, and get jurisdiction-specific advice.”
3. Reasonableness: Reasonable clauses vary. A 15-mile noncompete radius may be reasonable in rural environments, but is not in urban locales. The radius may shift depending on subspecialty, as subspecialists draw patients from larger pools. Finally, duration of the noncompete clause may depend on the length of the contract between the radiologist and practice. Two years may suffice for physicians with a 20-year history with the practice, but may unduly restrict radiologists employed for less than one year.
4. Public interest: “[Courts] will decline to enforce a noncompetition covenant, no matter how well written or reasonably drawn, if enforcing it would deprive the public of unique healthcare services.”
5. Termination: How the physician departs from the practice (termination without cause vs. voluntary resignation or termination for cause) may affect whether or not the courts enforce the clause.
6. Clean hands: The practice should be able to show that it honored all obligations, such as salary and work conditions to the departing physician. Otherwise, the court may not enforce the noncompete clause.
7. Remedies: Courts may award three types of remedies. Injunctive relief restricts the radiologist from working in the area for the balance of the clause. A liquidated damages clause requires the physician violating a noncompete to compensate the former practice. Courts tend to disfavor such clauses, explained Breitenbach, and may insist on proof that the payment reflect actual damages rather than a penalty. Compensatory damages relate to the actual dollars lost by the physician’s breach of the noncompete clause.
8. Ending dates: It is difficult to determine and enforce clauses when a radiologist continues to work for a practice after the contract has ended. That’s because the end time, and hence the start of the noncompete clause, is unclear.

“The takeaway message,” wrote Breitenbach, “is that care should be taken by both the practice and the physician in drafting and understanding a noncompete before it is signed.”