Restrictive non-compete covenants/agreements commonly appear in physician contracts to prevent working for competitors, with limitations that widely vary among covenants. For instance, geographic limitations of one covenant may be a mere 5 miles, whereas another covenant might mandate a 100- mile distance. While some covenants may last for 1 year, others may be valid for 3 years. They are not to be taken lightly, as breaking a non-compete covenant can result in fines up to $250,000. A survey of approximately 2,000 primary care physicians in five states found that 90% of all respondents were either engaged in a non-compete covenant at present or had beenin the past.
According to medical writer Samar Mahmoud, PhD-candidate, a valid non-compete covenant must be reasonable. In other words, it cannot prevent physicians from earning a living or supporting their families. Non-compete covenants must also demonstrate consideration, which is the physician’s “reward” for not competing. In the case of new hires, this “reward” is often the job offer itself. Mahmoud suggests that a valid non-compete covenant must also not include unnecessarily strict elements.
Non-compete covenant requirements may vary by state. Some states require that non-compete covenants provide physicians with the option to buy out of the covenant, with a buy-out price typically based on a percentage of the physician’s salary. States like Texas require that physicians be granted access to their patients’ records. Texas also permits certain patients to continue with care provided by the exiting physician.
Mahmoud suggests that non-compete covenants offer benefits for employers, like protecting investments made in physician training and avoiding situations in which departing physicians take a portion of their patient base. Although non-compete covenants give employers a sense of security, they can be disheartening for practicing physicians. For instance, having to move what could be 100 miles out of the restricted zone to honor an agreement could be stressful and disruptive for both physicians and their families.