Restrictive covenant

[Hatton]

YSH wrote:

Would recommend a lawyer (real JD not simply contract review services) to review the contract and discuss ways to remove or reword that so that it is more appropriate.  I personally feel like a restrictive clause is inappropriate for a new grad, just a way to lock new grads in (then in the meantime, sell new grad ideas of big house, big car and boom new grad is now debt loaded and locked in for life).  The truth is they don’t know how capable you are and sometimes they might not care (because let’s be honest, the liability is all yours) and you don’t know how much you will enjoy that position.

In addition to nachos31 suggestion, can also consider no restrictive clause in place until at least 6 months or 1 year into the practice.  The first year of practice involves a lot of acclimating to the private practice anyway and while there is some upfront investment on the part from the practice I think one year of “getting to know you” from both sides is appropriate.

I have had two recent new grads acquaintances who has been majorly screwed over by the same practice because of the restrictive clause.  Both signed without really thinking twice. The practice was basically known to be a sweatshop for new grads.  The boss man hires the new grad, throws a ton of cases at them, overworks them and then when the new grad wants to negotiate, the boss tells them to take a hike.  Because of the restrictive clause, both newly graduated doctors had no choice to but the uproot and leave the town. The whole practice is basically a two man show, where the boss is annually hiring and the new associates keep leaving. Sad for the patients and the associates. And of cos, the hospital loses a very capable young doc.

 

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This abuse of new grads really does happen. The churning of new grads and then no partnership offer at the end of the rainbow.  The way to avoid this is by talking to people in the same speciality In a different group. Ask about how many docs have been in your potential new group.  How many just stayed 1-2 years.  Of course if you can find someone who left the group that is even better. I have seen people recruit residents with hospital money and never offer them partnership and then recruit a new warm body for the call schedule in 2 years.  You keep the person at a relatively low salary backed by hospital funds and you the senior doc make all the money.  You retire early.  An unethical way to fire.  Be careful about this new grads.

[Raster]

Abuse of new grads absolutely happens.  Avoiding that is another (large) topic.  Good job at eliminating your restrictive covenant.  As far as restrictive covenants, it is highly dependent on the field in which you are looking for a job.  In many referral specialties, eliminating a restrictive covenant is a non-starter for people following a traditional private practice model.  When I was looking, no desirable job, even in rural/underserved areas, could be had without a restrictive covenant.  The VA was just about the only option if you insisted upon being without a restrictive covenant.

As far as the geographic area, if patients in the practice come from an area, it is reasonable to have a covenant including that area.  This may be measured in city blocks or most of a state depending on the population, specialty and practice dynamics of the area.

If a practice churns new grads - you must know about this.  Everyone else in the field in the town knows about it.  You should call them.  Talk to drug/equipment reps who may be able to tell you about the proposed practice's previous employees.

 

[RadDoc6876]

Zaphod wrote:

All this its “standard” stuff as usual turns out not to be true

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Can't tell you how many times I have heard people just ignore these non-compete "agreements" without any consequence in the end.  I think they're just intimidation tactics and probably should be illegal.  In fact I think some states have laws prohibiting them as a requirement for gaining employment.  Having said that I wouldn't make any real decisions without legal counsel as noted above.

[Zaphod]

RadDoc6876 wrote:

Zaphod wrote:

All this its “standard” stuff as usual turns out not to be true 

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Can’t tell you how many times I have heard people just ignore these non-compete “agreements” without any consequence in the end.  I think they’re just intimidation tactics and probably should be illegal.  In fact I think some states have laws prohibiting them as a requirement for gaining employment.  Having said that I wouldn’t make any real decisions without legal counsel as noted above.

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Ignoring them is dangerous. You have to know your state and precedent. It is 100% illegal in california (outside partnerships and special situations). Honestly two very important factors when choosing where to live should be tort reform and business stuff like non competes. This can really make life easier overall. You may pay for it (california).

[pulmdoc]

California, North Dakota and Oklahoma are the three states that forbid non compete clauses outright. Definately worth knowing if you are in your job search.

[childay]

Interesting thread, good job negotiating guys.  As my spouse and I are a dual physician couple I would never have signed a non-compete contract

[ticker]

nachos31 wrote:

Awesome job, BlueBonnet and Ticker. Out of curiosity, how did those conversations go in terms of did you bring it up as being unfair or something you didn’t like or what? When they made claims as they often do about it being “the standard contract” or “all the others have signed this and it would be unfair to give you something different” how did you respond?

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To (over)state it plainly: An employee sells his time.  A slave sells himself.

I just told my employer I was willing to sell my time but nothing more.  In other words, I would give them the hours/shifts/calls/etc specified in the contract, but I was not willing to give up the freedom to do whatever I wanted during my time off or when I no longer work for them.

The kicker is that I have no plans to exercise this freedom, yet I was still absolutely planning on walking away if I couldn't have it.

[ddscook]

pulmdoc wrote:

California, North Dakota and Oklahoma are the three states that forbid non compete clauses outright. Definately worth knowing if you are in your job search.

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My husband just interviewed with a private practice in CA and the CEO mentioned to him that they have a 25-30mile RC from any of their practice locations.

Why do practices even place these non-competes in their contracts if they know it's not enforceable in CA

[q-school]

good news.

 

[Rando]

Coming at it from the opposite angle - I employ a PA, have a restrictive covenant in the contract and am not sure I would have hired her had she refused it.  Especially in the first few months she was a net loss financially what with licenses, credentialing, etc plus I had her on a light schedule to get used to things and it took a while for her to get busy.  I did not want to take the risk she would go across town to a competitor after I had invested the time and money.  There is a clause where a new employer could "buy out" her RC but it is fairly onerous.

RC's are enforced in my state and local physicians that took them to court have failed more often than not.

[jpa]

Rando wrote:

Coming at it from the opposite angle – I employ a PA, have a restrictive covenant in the contract and am not sure I would have hired her had she refused it.  Especially in the first few months she was a net loss financially what with licenses, credentialing, etc plus I had her on a light schedule to get used to things and it took a while for her to get busy.  I did not want to take the risk she would go across town to a competitor after I had invested the time and money.  There is a clause where a new employer could “buy out” her RC but it is fairly onerous.

RC’s are enforced in my state and local physicians that took them to court have failed more often than not.

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Surely there are ways you could have hedged against that? Pay for productivity instead of salary, not hiring her until she was licensed, having a system that's easy enough to navigate that they can jump right in, etc. For the positive reinforcement side, perhaps a retention bonus after the first year.

I think I'd rather open up my own office, rather than risks 10s of thousands dollars should I need to leave a situation that I need to leave.

[Kamban]

jpa wrote:

Surely there are ways you could have hedged against that? Pay for productivity instead of salary, not hiring her until she was licensed, having a system that’s easy enough to navigate that they can jump right in, etc. For the positive reinforcement side, perhaps a retention bonus after the first year. I think I’d rather open up my own office, rather than risks 10s of thousands dollars should I need to leave a situation that I need to leave.

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If you are truly a student and not someone who has practiced in the real world, I can understand your sentiments.

In reality people want to be paid at their full salary from day 1 and not have to worry about incomplete licenses, insurance panel enrollment, decreased work load etc. When you are new graduate, delayed gratification does not work. The sentiment of new hires is "show me the money.".

As to opening your own office which will cost thousands of dollars plus paying your employees when there is no money coming in for 6-8 weeks till the insurances cough up what they owe you - well it will cost easily 100-250K depending on the specialty. That is far more than the risk of breaking a restrictive covenant.

Bottom line: If you don't like the restrictive covenant fine print - don't sign. If the employer can't another hire he may take it out. As long as he finds people, he will keep it in the contract. Even the hospitals here use 1 year 30 mile radius RC.

 

[q-school]

jpa wrote:

Rando wrote:

Coming at it from the opposite angle – I employ a PA, have a restrictive covenant in the contract and am not sure I would have hired her had she refused it.  Especially in the first few months she was a net loss financially what with licenses, credentialing, etc plus I had her on a light schedule to get used to things and it took a while for her to get busy.  I did not want to take the risk she would go across town to a competitor after I had invested the time and money.  There is a clause where a new employer could “buy out” her RC but it is fairly onerous.

RC’s are enforced in my state and local physicians that took them to court have failed more often than not.

Click to expand…

Surely there are ways you could have hedged against that? Pay for productivity instead of salary, not hiring her until she was licensed, having a system that’s easy enough to navigate that they can jump right in, etc. For the positive reinforcement side, perhaps a retention bonus after the first year.

I think I’d rather open up my own office, rather than risks 10s of thousands dollars should I need to leave a situation that I need to leave.

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good!  we need bright motivated people to stay entrepreneurial and open their own shops.

it's a lot of work!  if you are truly opening your own shop, you will have to negotiate with insurers.  that can be especially challenging, unless you accept that in solo practice you get the scraps and everyone employed around you is being reimbursed at a better rate for the same work.  price of freedom.

[jpa]

:good!  we need bright motivated people to stay entrepreneurial and open their own shops.

it’s a lot of work!  if you are truly opening your own shop, you will have to negotiate with insurers.  that can be especially challenging, unless you accept that in solo practice you get the scraps and everyone employed around you is being reimbursed at a better rate for the same work.  price of freedom.

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Most of my outpatient clinical rotations were with private practice physicians.  Every single one gave me the "business talk" on how they were successful, and reassured me that PP isn't dead for those who want to do it.  They all loved their careers and had great work life balance with above the national mean salaries.  Hopefully the opportunities will still be there in a few years.

[Dreamgiver]

In my area the rush to employment has stopped after the hospitals realized their projected numbers were flawed. You see, they were calculating how much physicians were bringing in and thought they could skim more off the top. What they did not account for was the loss of productivity once you switch to a salaried model. Now they got all these surgeons on a guaranteed salary, plus they gotta pay them benefits, health insurance, retirement match, PTO, CME, and such. I can't even remember the last time I saw these guys operate at night, or even have a full OR day. Huh, crazy stuff, who would have thought right?!