Q: All the employed doctors at my hospital, even those who were not up for contract renewal, just got a new contract that includes a 1-year, 10-mile non-compete clause. The letter that came along with this said that we will be paid $5000 to sign. The problem is that I don’t think that $5000 is enough compensation to make up for the potential career limitations.
A: You are misunderstanding what the payment is for. Rather than it being, as you see it, liquidated damage, which is a fixed compensation for a future loss that you would not have to itemize and prove, it is being included because your state requires that when a restrictive covenant is added on during the term of a contract that there must be some additional value offered to the employee. In other words, it is a sum to make the change enforceable later.
It is therefore not really the issue you need to be concerned about. Instead, you should focus on the actual terms of the restriction to see if you could live with them if you had to. For example, a one-year term is relatively short but ten miles may encompass all other available hospitals.
It would also be advisable to have this new clause reviewed by an attorney who does healthcare practice set-ups and so will be up-to-date on how the courts in your jurisdiction evaluate the terms of these covenants as far as reasonability and enforceability.
You want to determine if the limitation is inherently excessive or is excessive as to you in particular and so might be negotiable at this point.
However, never just sign a restrictive covenant planning to fight it later. The fact that you, as an educated individual with the means and opportunity to evaluate it, still chose to sign it will be sustained.