Non-Competition (Restrive Covenant) Agreements: How Likely Are They to be Enforced?

Non-Competition (Restrive Covenant) Agreements: How Likely Are They to be Enforced?

Elsewhere on my websites, I have discussed the legal factors which determine whether or not a non-competition agreement is enforceable.  Physicians  are served well to consider the practical question of whether or not such agreements are likely to be enforced, assuming they may be from a purely legal perspective.  A number of factors weigh in to this analysis. 

1.  The Economics.    

Consider whether it is worthwhile for the former employer to incur legal fees, time, and resources to enforce the non-competition clause.  Let us assume that you seek employment at a location which is in violation of your contract during the time when such employment is prohibited by the contract.  Does your new employment cause a financial  detriment to your previous employer?  In the absence of an economic detriment,  the chances that the former employer will seek to prevent your new employment are smaller.  On the other hand, the departure of a physician from a practice to another one in the same geographic area may mean that a substantial client base will have reason to follow the departing physician.  This type of financial harm may lead your employer to enforce the contract, for the financial benefit of the practice.

2.  The Terms.

Does your non-completion agreement provide that if you are in violation of the non-competition clause that the prior employer would be entitled to attorneys’ fees and costs of suit?  If the answer is yes, then the former employer has more incentive to bring an action knowing that they are likely to prevail in their attempt to recover attorneys’ fees and costs of suit.  Without the language, a practical attorney will advise a prior employer that the fees and costs incurred will not be recoverable.  Similarly, some non-competition agreements have a liquidated damages clause which provides that the departing doctor agrees to pay liquidated damages (a fixed sum) equal to a specified amount for each day that the doctor is found in violation of the non-competition clause. The  terms of your contract may tip the scales in favor of, or against, litigation.

3.  Other Factors.

Other, more personal factors may weigh in the employer’s decision.  For example, is the departing physician leaving on “good terms”?  If so, one way to avoid a potential suit to enforce the non-competition clause is to simply request the current employer waive the clause, and allow the departing physician to accept the offer which has been made to him or her.  The request, and the response of the current employer, should be made in writing in order to protect the departing physician. 

4.  Conclusion

The economics, the terms of your contract, and other factors weigh into a determination of whether or not the existing practice will elect to bring an action against a departing physician to enforce a non-competition clause.  Just because the clause is enforceable, doesn’t always mean that the prior employer is likely to bring suit.  Of course, no attorney can predict whether an existing employer will bring an action, but the physician who is contemplating departure or the enforceability of a restrictive covenant should bear these factors in mind.

Contact Romanowsky Law now to have your restrictive covenant reviewed.