Physician Non-Competes and Restrictive Covenants: Fact vs. Myth

Are Physician Non-Competes Enforceable? Facts About Restrictive Covenants

A non-compete clause can raise questions even if you have no immediate plans to leave your job. You may have noticed one while reviewing an employment agreement, heard that non-competes are “illegal now,” or heard a colleague say the provision “won’t hold up.”

The answer is rarely that simple. Whether a physician non-compete or other restrictive covenant can be enforced depends on the language of the agreement, applicable state law, and the circumstances surrounding the employment relationship and departure.

A restriction permitted in one state may be limited or prohibited in another. Even within the same state, the specific contract language and circumstances can matter. Here are some common myths physicians should understand before making decisions about a contract or a future move:

Myth: Every Physician Non-Compete Is Enforceable

Fact: A non-compete is not automatically enforceable simply because it appears in a signed employment contract.

State law can restrict or prohibit physician non-competes, and courts may consider factors such as the duration, geographic scope, and interests the restriction is intended to protect. Some states have specific rules for healthcare professionals, while others apply broader standards to restrictive covenants.

A signed provision is only the starting point. The actual language and the law governing the agreement matter. This is one reason a physician contract review can help before you sign an employment agreement. A review can identify restrictions that may affect your future practice and flag provisions that warrant further consideration.

Myth: Every Physician Non-Compete Is Unenforceable

Fact: The opposite assumption can be just as risky.

Some physician non-competes may be enforceable, depending on the state and the specific terms. Even if a restriction could be challenged, a physician should not assume it can simply be ignored.

A physician already thinking about leaving should also review the rest of the employment agreement. Notice requirements, termination provisions, compensation terms, and post-employment obligations may all affect the transition.

If you are weighing whether to leave your current position, understanding the contract before giving notice can be important. The answer to “Can I quit my job?” may depend on more than whether the agreement includes a non-compete.

Myth: If Your Employer Calls It a “Non-Compete,” That’s What It Is

Fact: The label does not necessarily determine what the provision does.

Employment agreements may contain several types of restrictive covenants. A provision might restrict competition, solicitation of patients or employees, disclosure of confidential information, or certain conduct after employment ends.

The practical effect of the language matters. A provision that does not use the words “non-compete” may still affect a physician’s ability to start a practice, join another healthcare organization, communicate with former patients, or recruit employees.

This is particularly important when you review a lengthy employment agreement. Looking only for the words “non-compete” may cause you to overlook other significant restrictions.

Myth: Non-Solicitation Provisions Are the Same Thing as Non-Competes

Fact: They can restrict different activities.

A non-compete generally limits where or how someone can compete after leaving an employer. A non-solicitation provision may instead restrict efforts to solicit certain patients, customers, referral sources, or employees.

The distinction matters because state law may treat these provisions differently. Physicians should look at the exact language rather than assuming that every post-employment restriction is subject to the same rules.

For example, a physician may be free to work for another practice but still face contractual restrictions concerning former patients or employees. Whether those restrictions are enforceable is a separate legal question.

Myth: A Non-Compete Only Matters If You Leave for a Competing Practice

Fact: A restriction may apply to many career moves, including opening your own practice or changing locations.

Depending on its wording, a restrictive covenant could affect a physician who plans to leave a hospital to open an independent practice, join a different healthcare organization, change locations, or otherwise continue practicing in the same market.

The issue becomes especially important when a physician leaves hospital employment and plans to start an independent practice. The physician may need to consider the employment agreement alongside issues involving patients, medical records, malpractice coverage, entity formation, and the transition itself.

For example, a physician leaving a hospital to start a private practice may need to address several contractual and operational issues before opening the new practice. Whether a non-compete is enforceable is only one of them.

Myth: If Your Employer Terminated You, the Non-Compete and Other Restrictions Automatically Disappear

Fact: Termination does not automatically answer whether a restrictive covenant remains in effect.

Some contracts distinguish between voluntary resignation and termination. Others address termination without cause, termination for cause, or other circumstances. State law may also affect whether a restriction can be enforced after a particular type of termination.

If you are terminated, review the agreement before assuming you are free from all post-employment restrictions. The same principle applies if you resign. Do not assume that giving notice or completing a notice period eliminates all continuing obligations under the contract.

Myth: If a Provision Is in the Contract, You Have No Choice but to Accept It

Fact: A contract provision is worth reviewing and discussing before you sign.

Physicians sometimes hear that an employer has a “standard” or “non-negotiable” employment agreement. That does not necessarily mean every provision must be accepted without review, or that the agreement is in fact non-negotiable.

Depending on the circumstances, you may be able to request changes or seek clarification before signing. Even if an employer is unwilling to change a particular provision, understanding its potential effect allows you to make a more informed decision about the position. This is particularly important for restrictive covenants because their impact may not become apparent until a physician is ready to leave.

Jackson LLP reviews physician contracts and provides practical guidance about provisions that can affect physicians during and after employment. Book your complimentary 15-minute consultation with our team today.

Myth: A Non-Compete Is the Only Restriction That Can Affect Where You Work After Leaving

Fact: Other restrictive covenants, such as a non-solicitation provision, can matter just as much.

A physician employment agreement may address non-solicitation, confidentiality, patient relationships, intellectual property, return of records, and other post-employment obligations. These provisions matter most when a physician leaves an established practice and wants to keep caring for patients or start a new practice.

A confidentiality provision, for example, may restrict the use or disclosure of employer information even when there is no enforceable non-compete. A patient-related provision may address communications with patients or how the practice handles patient relationships. A non-solicitation provision may address employees or patients separately from restrictions on competition.

The broader point is that physicians should review the full agreement rather than focusing on a single clause.

What Should Physicians Do When They Find a Restrictive Covenant?

Start with the actual contract. Identify provisions that could affect your ability to leave, join another practice, open a practice, communicate with patients, or recruit staff.

Then determine which state’s law applies and whether that law places specific limits on physician restrictive covenants. Illinois, New York, California, Texas, and Wisconsin do not all approach these restrictions in the same way, so a colleague’s experience in another state may not tell you what applies to your agreement.

If you are already considering a departure, the timing of the review also matters. Notice requirements, termination provisions, restrictive covenants, patient relationships, and other contract terms may affect what you should do before announcing your plans. For physicians reviewing an agreement because they expect to leave, physician contract review can focus on provisions that may affect the transition and future practice.

The goal is to understand what the contract says, what the applicable law provides, and what those provisions could mean for your specific circumstances.

How Our Healthcare Lawyers Can Help

If you are concerned about a non-compete or another restrictive covenant in your physician employment agreement, Jackson LLP can review the contract and explain the provisions that may affect your next steps. Contact our team to schedule a complimentary 15-minute consultation.

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Frequently Asked Questions About Physician Non-Competes