Welcome to Legal Dose, a monthly column by healthcare attorney Ron Lebow. He will cover legal issues that affect medical professionals in the Dermatology industry.
Enforceability
You may have been told that “they’re not enforceable anyway”, but while some states and courts do prohibit them and some laws provide limits on enforceable time frames (note that up to 3 years is usually enforceable) or who they may be imposed against (e.g., partners but not employees), in most instances they are in fact enforceable so long as the geographic area and defined scope of the covenant is reasonably related to the legitimate business interests of the employer. Does the employer actually get patients from that reach area? Are they in that line of business? In many cases, the answer is “yes”.
Often, the agreement will include a so-called “red or blue pencil” clause. This directs the court to edit and reduce the covenant to the minimum extent necessary to make it enforceable to the maximum extent possible, so you still don’t know if you might nevertheless fall within the covenant area after this judge-imposed modification!
Regardless, even if you think it is an overreaching covenant (and there is no red pencil clause in the contract), can you afford to spend the legal fees to fight it, particularly if you need a job right away without exposing your new employer to cease and desist threats for “interference with contract” or if you cannot get your legal fees reimbursed after all of that hassle (even if you win)?
Accordingly, you should only sign an agreement if you can live with the covenant.
Geographic Area
Always ask for them to reduce this. The worst they can do is say “no”. Within a city environment, miles might not be an appropriate border, and streets, avenues and natural boundaries (parks or rivers) make more sense. In rural areas, the appropriate mile radius is largely dependent on the nature of travel and the availability of healthcare in the area. In any event, see if you can prevent the radius from spilling outside of the border of a particular city, county, borough or state in which you are located.
Typically contracts written by attorneys in the unilateral favor of their client will have a broad covenant that applies to all of their locations, even if you do not work there. If it says you cannot work within a specified mile radius of “any” office or facility of theirs (or those with which they are affiliated), then try to have them limit it to the primary site in which you are assigned. While they may have only one office when you start, they may expand to many offices while you are there! If the covenant applies to all of their offices, then you are in trouble. The manner of determining your primary site might be based on the number of days on average spent there in the previous 12 months, percentage of time split, or number of patient encounters. Exclude offices you may sporadically cover. If telemedicine is involved where you cater to patients from various locations or if you are a dermatopathologist accepting specimens from multiple sites within the practice, then make sure it is limited to sites where you have an actual on-site presence.
Part-Time Work
Yes, restrictive covenants are even imposed for part-time jobs that are 3 or fewer days a week. You will still be introduced to their patient base and referral sources so you are a threat regardless. Nonetheless, I recommend seeing if they are willing to modify the length of time of the covenant or the geographic scope because of this.
If you have another job at the same time, then make sure that the covenant does not interfere with the locations of your other job. Even if you work at one location on behalf of another employer, they may have more than one office and expect you to either switch or to refer across offices. If one of their offices or facility affiliations falls within the defined geographic area, then make sure that you have express permission to continue to work for them without issue. If they do not agree to this, then at least have the employment contract acknowledge that you can work outside of the restricted area even if the practice or facility you work for also happens to have a location within the restrictive covenant area, as the language may be confusingly broader and prevent all affiliation with anyone operating within the area even if you are not assigned there.
Other Exceptions
You might also want to attempt to carve out academic positions or hospital-based positions. You can also try to have the covenant nullified completely if you are not there for a long time (i.e., a “honeymoon” period) [which may necessitate agreeing to repay any sign-on bonus or relocation reimbursement], among other possible nullifying exceptions, such as the employer breaching the agreement,your being terminated without any reason, or in the event of a sale of the practice. While there are reasons in favor of the employer against accepting all exceptions requested, you won’t get any if you do not make the attempt.
