Negotiating Doctor/Dentist Employment Agreements with Non-Competes

Welcome to Council Chronicles with CapEx Legal. Negotiating an employment agreement for a doctor or dentist can be pretty tricky, specifically around the non compete. It's tricky for a few reasons, and the first one is that the doctor and the practice have directly opposing interests. From the doctor's perspective, it's totally reasonable to have complete freedom in where the doctor works and how they work.

From the practice's perspective, there's a lot of risk every time a doctor is on board. A doctor creates a very close and personal relationship with the patients and becomes the reason why the patients might come to the practice. In a scenario where a doctor works with 50 up to 100 percent of the patients, having the doctor leave and take the patients with them could be catastrophic for the practice.

And so the practice wants some kind of protections there. At this point, it all comes down to a function of state law. The Federal Trade Commission is currently weighing a proposed rule on an outright ban on non competes, but as of January 2024, that doesn't yet exist. And so it all comes down to what a state enforces and what it's willing to enforce, including what laws are on the books.

In California, for example, there is a complete and outright ban on non competes for doctors. In DC, 

there's a little bit of lobbying as DC is known for. And so if an employee makes under $150,000, there's a ban on non competes. If they make over $150,000, there can be a non compete for up to one year. If it's a medical professional making over $250,000, then a non compete of two years is legal. In Virginia, if you go down to a rural area, a 20 or 30 year, even 40 mile non compete might be absolutely reasonable.

If, however, you're in Northern Virginia and you're in Alexandria or Arlington right across the river from DC, a two mile non compete could be unenforceable because it reaches into another state and Virginia won't enforce that. You also want to be thoughtful about how reasonable a non compete is. In certain states like New York, for example, it comes down to whether or not the non compete and how it's phrased is reasonable under all the circumstances.

So a five mile non compete for a doctor working in Bryant Park may be entirely unreasonable because it cuts out pretty much all of Manhattan. It's important to note that when you're reviewing a non compete, it can usually be broken down into multiple segments. The non compete can have a non compete for other practices in a certain geographic location.

It can have a non solicitation of employees. It can have a non solicitation of patients, and it can have a non solicitation for referral sources and referral partners. Each of these can actually be negotiated independently, depending on the scenario and the bargaining power, and that can really make a big difference in your goal set as a doctor or a dentist.

What I would suggest, however, is a more holistic view of the entire employment agreement. Some employment agreements are absolutely reasonable, and they don't really need a second look. Other employment agreements are more and more becoming a little bit over the top is how I'll phrase it. In one employment agreement I viewed recently, there was a provision requiring the doctor to inform the practice of their outstanding student loans and any non payment or default on those student loans.

I don't quite understand how that relates to their employment in any way. What I'm seeing more frequently rather than just a one off is a prohibition or transfer of all outside wages. This could include honoraria for public speaking, it could include reimbursements for travel, and in the most broadly worded versions, it could include passive income from rental properties.

So let's say you purchase an apartment and decide to grow into a house later on and you rent that apartment out. Under these employment agreements, you agree to transfer all of your income from the rental apartment to the practice. There's absolutely no basis for something like this, but often I see these actually signed in practice.

If you're looking at signing an employment agreement, it's usually wise to consult with an attorney. If you don't have an attorney, feel free to reach out at Capex.Legal. And thank you for joining me at Council Chronicles.

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