Here’s What Physicians Should Consider Before Signing a Non-Compete Agreement in 2023

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We believe physician contract negotiation is an essential step in your employment journey, but it can be overwhelming. You may notice non-solicitation or confidentiality agreements in the employment process, generally one of the most overlooked elements is a non-compete clause. 

Whether you’re about to sign your first contract or are considering a new position, physicians should consider a few things before signing a non-compete agreement.

 

What’s A Non-Compete Agreement For Doctors?

Every physician has to sign a new contract as part of the hiring process, but as you read through it, you may notice one hiccup: a non-compete clause. A non-compete agreement limits your ability to practice specific types of medicine in set geographic areas for a predetermined period. 

What would this look like?

For example, if you’re an Orthopedic surgeon, you may have to sign a non-compete with an employer that you won’t leave and open your competing practice a block down the street within a year of working for the company. 

There are three criteria for non-competes we suggest you be aware of:

  • Geography: The location to which you are restricted can range from 1-800 miles
  • Specialty: This is the type of medicine you can or cannot practice elsewhere
  • Timelines: Non competes typically last between 1 and 5 years

But remember, nothing is set in stone until you sign a contract. We believe physicians must understand all their options and negotiate what’s most important to them.

 

Why Do Employers Want You To Sign Them?

Generally, employers require non-compete agreements because they want to keep their business profitable if you decide to leave. It’s as simple as that. 

This is where a term called Protectable Interest comes into play. Your employer has a right to protect the investment they make in an employee, like hiring, training, education, and current patients. They generally don’t want to invest time and money in an employee only for that employee to start their practice in a year and take all of their patients with them.

But employers can’t make up their own rules. They must make “reasonable” demands, and terms in these agreements vary drastically from state to state. For example, in California, physician non-competes can’t be enforced. While in Iowa, non-competes are enforceable as long as the terms meet specific criteria.

We suggest you research and understand the details before signing a contract with a non-compete clause. Non-competes can be fully enforceable, and fighting them in court can cost you a lot of wasted time and money.

 

When Non-Competes Aren’t So Bad

If there’s a non-compete clause in the contract you’re currently reviewing, there’s no cause for panic. A non-compete doesn’t have to be the end of the world!

We recommend understanding the implications of what you are signing. If you are moving to a geographic location for a job you’re excited about, but have no tie to the area, a non-compete may be totally fine because you’d leave the area anyway if that practice doesn’t work out. Maybe you look at a map and the practices that exist within the radius of the non-compete and you see that there is a practice you could see yourself being interested in that is outside of the geographic area laid out in your contract where you wouldn’t have to move your family, but you could drive a little further to work if you needed to switch practices. 

There may also be a “buyout” agreement that allows physicians to end their non-compete by paying the practice a certain amount of money or allowing them to keep your accounts receivable. This is something to consider if the buyout is reasonable.

Ultimately, as long as you’ve considered the potential impacts of the non-compete provision, it doesn’t have to ruin an otherwise great deal.

 

Why Non-Competes Could Be Non-Starters

If you’re a seasoned professional with ambitions to open your practice or if you’re a new-to-practice physician moving home so your kids can grow up near the grandparents, we believe a non-compete should be thoughtfully considered and potentially negotiated so that you know you can keep your family in the area for the long haul regardless of what happens with your job.

We’ve worked with an interventional cardiologist considering signing a contract in a rural area where his wife’s family was from. His new potential employer wanted him to sign a non-compete agreement saying if he left their group, he wouldn’t work within a 50 mile radius for 2 years. 

We did some research and found that the nearest cath lab was over 90 miles away. If he signed this agreement and the job didn’t work out, he didn’t have another option within a 50 mile radius anyway, so trying to negotiate the non-compete wouldn’t have benefitted him. Instead, he and his wife thoughtfully considered the implications if the job didn’t work out. He signed the contract eyes wide open, and thankfully has been happy in the practice for many years now!

In another example, we worked with two different women physicians working at the same hospital. Based on their education and training schedules, they started at the hospital 5 years apart.

The first friend didn’t have a non-compete agreement, and the other did. Eventually, their workplace environment became toxic, and they both began to explore other options. It’s important to note that they’re tied to their community with kids enrolled in the school district and simply not wanting to leave a city they loved. 

When it came down to it, the first friend got an offer and was able to leave the hospital without any issues. The other ended up trapped because her non-compete kept her from being able to take a new job without significantly increasing her commute and taking time away from her family, or moving her kids to a different school. This is a great example showing the importance of negotiating your contract or at least requesting a buy-out option if a non-compete isn’t up for negotiation.

A non-compete could also be a non-starter if it prohibits you from practicing in a particular state or county. Always be sure to read the fine print.

 

Should Non-Competes Make It To Your Negotiation Table?

The short answer: it depends. 

Our belief is you must know what’s important to you and evaluate your career goals. Will a non-compete (or rejecting a job offer because of a non-compete) negatively impact your earning potential? Will it force you to move or make other sacrifices you’re not ready for? We suggest not accepting a position that’s less than what you deserve and make sure you have the flexibility you need for your family.

Remember that anything can make it to the negotiation table. You may request to limit the geographic scope or make exceptions within the clause for specific hospitals. The worst they can say is no, so you might as well ask.

In 2021, President Biden signed an executive order urging the Federal Trade Commission to limit the unfair use of non-competes, which could help improve the process. However, there is no clear plan of action (but we’ll be sure to keep you informed).

 

Go To The Negotiation Table With Confidence 

Our goal is to help physicians understand all their options and negotiate for what’s most important to them. Whether you are okay with a non-compete agreement or want to explore other opportunities, our team at Vestia can help guide you through the process. Don’t settle—contact our team today.

Disclosures:

Investment advisory services offered through Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, and Vestia Advisors, LLC. Securities offered through Ausdal Financial Partners, Inc., 5187 Utica Ridge Rd, Davenport, IA. 52807 (563)326-2064. Member FINRA/SIPC. Vestia Personal Wealth Advisors, Vestia Retirement Plan Consultants, Vestia Advisors, LLC, and Ausdal Financial Partners, Inc. are independently owned and operated.

This material is intended for informational purposes only. It should not be construed as legal or tax advice and is not intended to replace the advice of a qualified attorney or tax advisor.  This information is not an offer or a solicitation to buy or sell securities.  The information contained may have been compiled from third-party sources and is believed to be reliable. All investing involves risk, including the loss of principal.

 

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