4 Questions New York Physicians Should Ask to Beat a Non-Compete Agreement

For workers in any industry, non-compete agreements are bad news. If you’re a medical professional, these contracts can prevent you from seeking more competitive pay or pursuing your professional goals by starting your own practice.

According to the New York Times, 45% of primary care physicians in a survey of five states were bound by covenants not to compete. 

Because of the negative impact that non-compete agreements have on workers and the economy, many states have restrictions on when they can be enforced.

In New York state, non-compete agreements have to meet four essential criteria — otherwise they’re invalid.

In this blog post, we’ll walk you through what the law in New York says about non-compete agreements, the key factors that make an agreement enforceable, and how doctors can fight these restrictions. 

If you are a physician, and have questions about non-compete agreements, please contact us online or call 347-492-1904 today.

What Are Physician Non-Compete Agreements?

A non-competition agreement prevents a doctor from competing with their current employer, partners or associates during and after the end of the current relationship.

These clauses (usually included in your employment contract) can include specific limits on the geographic area where physicians can find jobs, as well as the time period when they can take a new one.

For example, an orthodontist whose company is located in Manhattan might be forced to join a new practice in Brooklyn or Queens. 

Supporters of physician non-compete agreements say that these contracts legitimately protect employers’ investments in providing specialized training for doctors.

These protections also prevent unfair competition, loss of the employer’s confidential business information, and the loss of patients from established practices to departing physicians.  

But for medical professionals, non-compete agreements don’t just risk harming doctors’ career goals and potential wages. They can also inhibit patient care by preventing doctors from continuing to treat current patients after they leave their current employer.

For instance, a non-compete could prevent a surgeon who moves to a new hospital from seeing any previous patients for up to two years after they end their previous position.

Some states, like Massachusetts and California, place severe limitations on physician non-compete agreements, or have them banned altogether.

These states may disfavor any and all “restraints on trade.” Or they may assess patient choice and continuity-of-care as higher imperatives of the healthcare industry than its commercial interests. 

In New York, courts generally are not in favor of enforcing employer non-compete agreements. Contracts restricting physicians from competing with a former employer or associate will be enforced only if they meet certain requirements. 

Valid non-compete agreements must be: 

1. Reasonably limited in time, geographic area, and scope; 
2. Necessary to protect the employer’s interests;
3. Not harmful to the public; and
4. Not unduly burdensome on the employee.

What Makes A Physician Non-Compete Agreement Enforceable In New York?

An employer’s non-compete agreement can only be enforced if it meets these four criteria. When courts consider if one of these contracts should be enforced for a medical professional, they’ll consider the following questions.

Is The Restriction Reasonably Limited In Time, Geographic Area, And Scope?

Non-compete agreements need to have “reasonable” limits for physicians. But what a court considers to be reasonable can vary according to the specific facts and circumstances of each case.

For instance, in 2007, a New York court found a three-year ban on competition to be reasonable in the case of an ear, nose, and throat doctor who left his prior practice.

Whether a geographic limit is reasonable can depend on where you are. Many agreements prohibit competition in specific counties, or in a 15-30 mile radius around the location of the former employer.

But for a physician practicing in Manhattan, a restriction of 30 miles may not be considered reasonable. In this case, a 30-mile ban would more than encompass the entire area of Manhattan, and thus would almost certainly exceed what would be necessary to protect the employer’s legitimate business interests.   

The non-compete agreement’s terms also have to be limited in scope, meaning the agreement has to name specific branches or sub-specialties of medicine that the employer or firm considers its competitors.

An agreement that prohibits a doctor from practicing any kind of medicine whatsoever is too broad. In that case, a judge could throw it out, or demand that it’s revised. 

 Is The Restriction Necessary To Protect The Employer’s Interests? 

Employers seeking to enforce physician non-compete agreements must be able to demonstrate that they have a protectable business interest — not just a desire to avoid competition.

For medical practices, these interests could include proprietary techniques, investments in professional or specialized training provided to physicians, or goodwill and established client relationships. 

In New York, professionals such as physicians are considered to provide “unique or extraordinary” services. This means courts can give greater weight to the interests of employers in restricting competition within a confined area.

In the past, courts have enforced non-compete bans on those grounds: for instance, when an employer can show they’ve gone to great expense to bring a doctor to a specific community, without which the physician wouldn’t have been able to get the position with a nearby competitor.

Is The Restriction Harmful To The Public? 

Since physician non-compete agreements can limit the rights of patients to receive care from the doctor of their choice, there is usually some case to be made that a non-competition agreement would be harmful to the public.

There could be cases where enforcement of a non-compete agreement might lead to a shortage of doctors in a particular area or within a particular specialty. Or, it might prevent a patient from being able to continue a course of treatment without disruption. 

These types of negative impacts are even acknowledged and addressed in the American Medical Association’s Code of Medical Ethics.

The Council on Ethical and Judicial Affairs, which maintains and updates the AMA’s Code of Medical Ethics, warns physicians that they should avoid entering into contracts that unreasonably restrict their ability to practice medicine.

They also warn to not enter into contracts that don’t make “reasonable accommodation for patients’ choice of physician.” Ultimately, though, the AMA’s Code of Ethics doesn’t prohibit doctors from signing non-compete agreements, or say that doing so is unethical in all cases.

Because of that, courts take other factors into account when determining if a non-compete agreement could potentially harm the public. For example, if the size of the ban’s geographic scope is fairly limited, patients may still be seen by a doctor at alternative hospitals just outside of the restricted area.  

Is The Restriction Unduly Burdensome? 

Courts may refuse to enforce a non-compete agreement that’s unduly burdensome on the employee. For instance, an agreement whose restrictions were so broad that they’d prevent someone from being able to make a living in their industry at all.

In a 2018 case, a New York court didn’t uphold a physician assistant’s non-compete agreement because doing so would have placed an undue burden on his livelihood.

The assistant had continued to work at the same hospital where a medical staffing agency had placed him after the hospital had terminated its agreement with the agency.

Although the staffing company had offered to place the assistant at several other hospitals, one of them was several hours away. As for the other possible placement, the assistant had already worked there and had requested a transfer away from it.

Since the court agreed that enforcing this contract placed undue burdens on the physician assistant, it did not meet New York’s standards. 

How Physicians Can Beat A Non-Compete Clause

When you’re bound by a non-compete clause, you can feel frustrated and trapped. But medical professionals who’ve signed these contracts still have options for getting out from the restrictions of the agreement. 

First, take a close look at the non-compete agreement you’ve signed, and assess if it violates any of the four rules that New York law has for employer non-compete agreements. 

Does it:

• Ban you from practicing any kind of medicine, not just a specific type?
• Force you to move your home to find a new job?
• Deprive underserved communities from vital medical care?

If so, you may be able to challenge the validity of the agreement in court.

Additionally, consider if your non-compete includes a buy-out clause. This is a provision that allows a doctor to pay a certain amount of money to be released from the obligation not to compete.

But before you pay up, take note: since the payment you’d make is a form of damages, it can’t be much more than your employer’s anticipated loss at your departure. If it is, it’s considered punitive, and can’t be legally enforced.

Get in Contact with a California Non-Compete Agreement Lawyer Today

New York courts consider the validity of non-compete agreements for physicians on a case-by-case basis. That’s why it’s critical that you have an experienced advocate who can help you understand the nuances of the law and the details of your contract.

Ottinger Employment Lawyers has been fighting to win professionals back their freedom to work since 1999. If you’re facing a non-compete agreement, contact our team today to learn more about how we can help you.

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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