When examining offers for their first position after residency or fellowship training, early career physicians may not realize the importance of thinking about what happens if they leave that job—specifically, what their contract includes in the way of noncompete clauses, according to a lawyer who specializes in health care employment law.
“So many times, I talk to residents or medical students who think that they're exempt from noncompete clauses, and that is not accurate at all,” said Richard H. Levenstein, a health care lawyer and shareholder at the law firm of Nason, Yeager, Gerson, Harris & Fumero, in Palm Beach Gardens, Florida. “Some states are now beginning to outlaw covenants not to compete, but in the vast majority of states, they're still valid.”
Commonly called noncompete clauses or restrictive covenants, “covenants not to compete” are legal agreements between a physician and an employer governing the geographic limitations and scope of practice for the physician’s next job after departing. The covenants may enforce time limits, the solicitation of patients or staff, geographic distances, affiliation restrictions and the type of practice or specialty.
Violating the clauses can be expensive, resulting in court costs and legal fees, damage awards or lack of income when a judge orders a physician to cease practicing in a particular area. The results can be dire if a physician finds themselves feeling locked into a job or pushed out of a geographic area.
Noncompete clauses are “very important, especially for residents,” Levenstein said, because “the resident’s first contract can be often the most important one they sign. It could set the tone of their career, and where they're going to be for a lengthy period of time or whether they have to leave where they start and give up on the roots that they've set down.”
That’s why experts and the AMA agree: Physicians need the help of an attorney well-versed in health care law to examine contract provisions like covenants not to compete.
The AMA has teamed up with Resolve, a contract review and negotiation firm specializing in physician employment, to provide custom-contract review to AMA members at a discount. Resolve offers personalized legal experience to help physicians secure the best employment contract terms no matter where they are in their careers. Ready to access your AMA-member Resolve discount? Learn more now.
Among other resources, Resolve offers state-by-state information relevant to physicians on laws covering noncompete agreements, telemedicine and more.
A confusing jumble of rules
The legal landscape for noncompete clauses has evolved over the last few years. Just this year, Arkansas and Wyoming appeared to join Massachusetts and New Hampshire in banning all restrictive covenants for physicians. But the legal status of noncompete agreements in most states remains far more complex.
In Louisiana, for example, a ban on noncompete clauses took effect this year, though it distinguishes between primary care physicians and nonprimary care physicians. Pennsylvania’s law restricts the covenants to one year or less and says they are only enforceable if the physician voluntarily leaves the job. Meanwhile, Oregon law prohibits many noncompete agreements but says they can be used in certain situations, including by “professional medical entities.”
With such variance from state to state, and so many recent changes, physicians need help. The AMA recommends that all physicians, before signing any employment contract, retain the services of an attorney who specializes in health care employment law.
And Resolve offers automated risk assessment of contracts, a process that will flag areas of concern and identify the level of risk with each negotiating point. Then, physicians can get the help of an experienced attorney to negotiate the contract.
AMA members get a 20% discount on all Resolve services, which include:
- Custom contract review for any type of employment contract.
- Access to experienced attorneys who can negotiate on your behalf.
- Real-time, comprehensive compensation data and benchmarks to help you understand your worth.
- An instant contract-review option, powered by Resolve’s attorney-trained AI model.
- Free tools such as a contract scorecard to give a quick overview of where your contract stands.
Steering clear of trouble spots
Lawyers who specialize in health care employment can help explain how a proposed contract may restrict your practice after departing the job. They may be able to negotiate some changes to the more onerous parts of a restrictive covenant—for example, a noncompete clause that triggers even if the physician doesn’t voluntarily leave the position.
“When they [employers] put them in the contracts, they put them in there for a reason,” Levenstein said, noting that employers that include noncompete clauses in contracts are unlikely to remove them entirely. “I try to either reduce the distance significantly or the time—or both—or what triggers their enforceability.”
Physicians should also know about the exceptions: There are geographic areas in which it can be difficult or impossible to enforce a noncompete clause, in the event of a critical shortage of the physician’s specialty in the geographic area.
“One thing that would surprise physicians and residents is that the way that covenants not to compete are enforced is by injunctive relief—an injunction, basically, telling a doctor to cease and desist practicing within the geographic area,” Levenstein said, adding that “injunctions that are contrary to the public health and welfare are prohibited.”
If a doctor is practicing in an area determined by the U.S. government to be in a critical shortage of a particular specialty of physician, he said, “enforcing a covenant not to compete against someone in that specialty area would be damaging to the public health and welfare.”
But Levenstein, who has decades of experience helping physician clients, including through contract negotiation, warned that doctors should not assume they are exempt from noncompete agreements.
Absent a critical shortage area exception related to public health, “the fact that you're a physician makes no difference, and it's enforced against you like anyone else in states where those covenants are otherwise enforceable,” he said.
If you are looking for your first job after residency or fellowship, get your cheat sheet from the AMA now.
