Restrictive covenant

[Chickenlittle]

Practice in Virginia and paid a lot of legal fees to challenge a restrictive covenant.  I am not a lawyer and you need to seek legal advice but what I was told was that there are several ways to challenge one. If you do challenge it, it becomes a very high stakes game. Group would get injunction and stop your practice then you would challenge in court. If you win it you would be awarded damages for inability to work. There is not mechanism to find out without challenging it. Of course you could negotiate a release as group realizes what they could lose.  I was told if the restrictions were overly broad (my case county wide) then it could be struct down (court would not reduce it but strike it down). Also if you could prove your practice was essential to community it would be ruled against since community good would outweigh the contract (for instance you were only type of specialist in county with multi specialty group). In my case restrictive covenant was overly restrictive and the group had no chance of enforcing it so they negotiated and released it. Still ended up in court when new contract was violated by them (some people never learn). I was at least smart enough to insist on clause that if contract violated and litigated losing side responsible for all legal costs. Ended up with very generous payment and legal costs paid. However, I would never recommend litigation except as last recourse. Time consuming, disruptive and not worth it

[q-school]

pulmdoc wrote:

ddscook wrote:

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

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Because they know that you may not know it’s non-enforceable.  Someone I know practices in a state w/o restrictive covenants, employer contract had one anyway, he left and thought RC was enforceable, commuted 90 minutes each way for 2 years as a result.  There’s little downside for the employer to try and get away with whatever they can.

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my parents used to own a dry cleaning store.  they had a sign up not responsible for damaged clothes, stuff left in pockets etc.  legal?  who knows.  did it deter issues when you pointed at the large sign behind you?  definitely.



 

[pulmdoc]

ddscook wrote:

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.

Click to expand…

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

Click to expand...

Because they know that you may not know it's non-enforceable.  Someone I know practices in a state w/o restrictive covenants, employer contract had one anyway, he left and thought RC was enforceable, commuted 90 minutes each way for 2 years as a result.  There's little downside for the employer to try and get away with whatever they can.

[q-school]

jpa wrote:

: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.

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i meant it when i said good!  need bright motivated people to stay entrepreneurial.

there is a huge difference between joining a private practice group and starting your own practice.  if they are business savvy then it is hard to believe they don't have a restrictive covenant in place to protect them.  why don't you ask them about that aspect?

i'd be curious to see how they maintained above the mean salaries.  it is certainly doable, but not for starting a solo practice for many years.  not with great work life balance.  at least not in my experience.  something has to give.  possible exception if someone very experienced is starting their own practice with a good reputation and referral base already in place.

anyhow good luck!

 

[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?!

[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.

Click to expand...

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.

[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.

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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.

Click to expand...

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.

[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.

Click to expand...

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.

 

[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.

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.

[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.

[q-school]

good news.

 

[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.

Click to expand...

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

[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.

[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

[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.