Law & Medicine

Covenants not to compete


 

It behooves the newly recruited physician to study the employment contract, preferably with the aid of an experienced attorney. Likewise, the employer should continue to use reasonable NCCs to protect its legitimate business interest. In general, employment contracts tend to be standardized or "boiler-plate," and are typically generated by the employer. So the prospective physician-employee should carefully note the terms, and clarify or negotiate, if necessary, any that are unfavorable, unfair, or ambiguous. A buyout option is sometimes incorporated into an employment contract, which allows the employee to pay "liquidated damages" of a predetermined sum as a way out of the restrictions. These buyout options have withstood judicial scrutiny if the damages, such as a year’s salary plus reimbursed moving and other expenses, are rationally based and deemed neither excessive nor punitive. Another option is a "nonsolicitation" clause that prohibits the departing doctor from encouraging former patients to relocate.

Citations

1. Opinion 9.02. "Restrictive Covenants and the Practice of Medicine." Code of Medical Ethics of the American Medical Association, 2012-2013 edition, p 325.

2. Murfreesboro Medical Clinic v. Udom, 166 S.W.3d 674 (Tenn. 2005).

3. Wichita Clinic v. Louis, 185 P 3d 946 (Kan. 2008).

Dr. Tan is a former professor of medicine and adjunct professor of law at the University of Hawaii. This article is meant to be educational and does not constitute medical, ethical or legal advice. It is adapted from the author’s book, "Medical Malpractice: Understanding the Law, Managing the Risk" (2006). For additional information, readers may contact the author at siang@hawaii.edu.

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