Your Non-Compete Clause Still Matters

The Highlights

·      In April, the Federal Trade Commission (FTC) created a rule banning non-competes nationwide.

·      On August 20, 2024, a federal court in Texas found the FTC’s rule to be unlawful.

·      The FTC may appeal the court’s decision and noted the court’s ruling does not preclude it from addressing non-competes on a case-by-case basis.

The Takeaways

·      Non-competes are still enforceable in physician employment agreements.

·      Physicians should understand how their non-compete clause practically impacts their exit options.

·      Physicians should understand how their non-compete impacts them before they enter an agreement and not when it’s time to leave.

The Background

·      What’s a non-compete clause? A non-compete clause is a contractual agreement between an employer and employee that prevents the employee from competing with the former employer within a certain geographic range and for a certain time.

·      States that permit non-compete clauses generally require the restrictions to be reasonable. For example, a geographic restriction that prohibits a physician from working anywhere else in a state after leaving an employer is likely to be unreasonable; however, a geographic restriction of 30 miles from the former employer is more likely to be a reasonable restriction.

The Action Items

·      Try the following exercise. Review the geographic restrictions in your non-compete clause. Pull out a map and figure out what employment options you have outside your geographic restriction. Don’t like what you see? That may be a good place to start negotiations.

·      If you’re preparing to sign your first contract, consult a qualified attorney to help you make sense of things. The Contracts Counsel can help you gain clarity, confidence, and control of your career. Click here to get started.