Can a Doctor Be Held to a Non-Compete in New York?

physician non-compete clause

A non-compete agreement is a written contract that prohibits an employee from operating a competing business or working for a competitor in a specified geographic area for a specified period of time.

A non-compete agreement may be a separate agreement, or clause in an overarching employment contract.

What Does a Physician Non-Compete Agreement Do?

Most physicians are familiar with non-compete agreements. Some courts refer to these as restrictive covenants not to compete.

Medical employers frequently use these instruments to protect their medical practice from competition by former physician employees.

A physician non-compete clause especially comes into play where an employer has invested significant time and resources to provide specialized training to a physician.

It would be unfair for a physician employee to simply quit after this type of valuable training, set up a practice across the street, and poach patients from their former employer.  

How Are Non-Compete Agreements Enforced?

There are no federal laws governing the use of physician non-compete clauses. Rather, state contract law determines whether a non-compete agreement is enforceable.

In New York, former employers enforce non-compete agreements. Enforcement comes in the form of a lawsuit.

The former employer can ask the judge to enforce the non-compete agreement and require the former employee to abide by its terms and conditions.

Although general principles of contract law apply, additional issues arise when considering non-compete agreements and particularly physician non-compete clauses.

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When Is a Non-Compete Agreement Enforceable?

To determine if a non-compete agreement is valid and enforceable, New York courts will take into consideration the language of the written contract and the former employee’s job duties.

New York Courts will only enforce a non-compete agreement if it satisfies the three factors we will discuss below.

The Non-Compete Agreement Is Necessary to Protect the Employer’s Legitimate Business Interests

New York courts have recognized a broad range of legitimate employer interests safeguarded by valid non-compete agreements.

These include:

  • An employer’s trade secrets or confidential information;
  • An employer’s goodwill and reputation within its industry or market; and
  • An employer’s interest in preventing competition with the former employee when the services at issue are highly specialized or unique in some way.

These legitimate business interests are typically protected by the courts.

The Non-Compete Agreement Does Not Impose an Undue Hardship on the Employee and Is Not Harmful to the Public

Courts will strike a non-compete agreement down if it imposes an “undue hardship” on the employee, or causes “injury” to the public.

For example, New York courts have held that firing an employee without cause may void an otherwise valid non-compete agreement.

In another case, a court held that a non-compete agreement was void because it unduly restricted the employee’s right to apply skills and knowledge acquired by the overall experience of their previous employment.

The Non-Compete Agreement Is Reasonable in Time Period and Geographical Scope

New York courts focus on the particular facts and circumstances of each case. Judges review a contract to determine whether the non-compete agreement is overly broad.

Courts consider a clause to be overbroad if it includes an unnecessarily large geographical area or too extensive a time period. New York courts generally consider periods of six months or less to be reasonable and permissible.

Some courts have even upheld non-compete agreements that extend up to two years in duration, depending on the circumstances of the case.

With respect to geographical scope, state courts look to whether the prohibited area is reasonably related to the geography of the employer’s medical practice.

Arguments Against Non-Compete Agreements for Medical Professionals

Non-compete agreements are alive and well in New York. As long as they satisfy the criteria discussed above, courts will generally enforce their terms.

However, the law may be shifting somewhat.  For instance, courts may scrutinize non-compete agreements that materially limit a patient’s access to care or their choice of doctor.  

The American Medical Association (AMA) is on record stating that it, “discourages any agreement between physicians which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of employment.”

The AMA’s reasoning stems from concern for public welfare. It has stated accordingly, “[C]ovenants not to compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services.”

A Seasoned Employment Law Firm Who Will Fight For You

For nearly 22 years, Ottinger Employment lawyers have assisted clients with many types of work-related matters.

We are experienced in litigating the interests of physicians and employers alike.

Whether we are fighting an unconscionable restriction on a physician’s right to practice or defending an employer’s right to impose reasonable restrictions on former employees, Ottinger Employment Lawyers know how to fight to obtain the results you deserve.

Contact us today for a free consultation.  

For details about our New York office, click here.

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Robert Ottinger, Esq.

Robert Ottinger is an employment attorney who focuses on representing executives and employees in employment disputes. Before starting his firm, Robert slugged it out in courtrooms trying cases for the government. Robert served as a Deputy Attorney General for the California Department of Justice in Los Angeles and then as Assistant Attorney General for the New York Attorney General’s Office in Manhattan.

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