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31 J.L. Med. & Ethics 283 (2003)
The Legal, Ethical, and Practical Implications of Noncompetition Clauses: Why Physicians Should Know before They Sign

handle is hein.journals/medeth31 and id is 285 raw text is: The Legal, Ethical, and Practical Implications of Noncompetition Clauses: What Physicians Should Know Before They Sign Derek W Loeser E mployers of all types, including group practices, health maintenance organizations (HMOs), and uni- versity and other hospital practices, commonly include noncompetition clauses in physician employment contracts. The clauses only apply in the event physicians leave their employers, and typically only limit activities in relatively narrow geographic areas. Consequently, physicians often agree to the clauses without much thought or analysis. This is a mistake, as the clauses may have broad adverse ramifications for both physicians and patients. This article identifies the standard components of noncompetition clauses, addresses the ethical and practical concerns they raise, and reviews recent court decisions on point. The article concludes that despite public policy con- cerns, courts can and often do enforce the clauses. The purpose of the article, therefore, is to increase physicians' awareness of the potential impact of these clauses, and to encourage physicians to carefully consider whether to accept contracts that contain them, or at the very least to negotiate for the least restrictive terms possible. STANDARD CoMPoNENTs OF NONCOMPET1TION CLAUSES The typical noncompetition clause bars the physician from engaging in two primary activities: (1) encouraging patients to follow the physician to his or her new place of employ- ment - generally referred to as a nonsolicitation clause; and (2) practicing medicine for a set period of time within a certain distance of the prior employer's location, or the loca- tion of clinics in which the physician worked - referred to as time and geographic restrictions. The typical clause also contains the physician's consent to the issuance of immedi- Journal of Law, Medicine &Ethics, 31 (2003): 283-291. © 2003 by the American Society of Law, Medicine & Ethics. ate injunctive relief by a court in the event the physician breaches the noncompetition agreement. Most agreements also contain a liquidated damages provision, which estab- lishes a pre-set damages amount that the physician may be required to pay for breaching the noncompetition clause. Provided below are examples of the standard compo- nents of physician noncompetition clauses, together with a brief discussion of the legal and practical impacts of each component. Nonsolicitation clause The Employee expressly agrees not to utilize any of the Employer's patient records, either clinical or financial, regardless of how these records were obtained or originated, for the purpose of contact- ing former patients or for any other purpose. The Employee also expressly agrees not to solicit pa- tients of the Employer for the purpose of continu- ing to treat the patients following termination by the Employer. This clause bars the physician from using confidential records in order to solicit, or otherwise contact, patients following termination. The provision does not actually pre- vent the physician from treating the patients; rather, it just prevents solicitation. Thus, patients may on their own ac- cord follow their doctor to her new place of employment.' This distinction has led to many battles over what consti- tutes solicitation. This has been a particularly hot subject in the securities industry where nonsolicitation clauses have been standard for many years. In that context, some courts have found that an announcement mailed to all persons served by the former employee of his new place of employment is not improper solicitation.2 Arguably then, the same conduct

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