The legal, ethical, and practical implications of noncompetition clauses: what physicians should know before they sign.

Abstract

Employers of all types, including group practices, health maintenance organizations (HMOs), and university and other hospital practices, commonly include noncompetition clauses in physician employment contracts. The clauses only apply in the event physicians leave their employers, and typically only limit activities in relatively narrow geographic areas. Consequently, physicians often agree to the clauses without much thought or analysis. This is a mistake, as the clauses may have broad adverse ramifications for both physicians and patients.This article identifies the standard components of noncompetition clauses, addresses the ethical and practical concerns they raise, and reviews recent court decisions on point. The article concludes that despite public policy concerns, courts can and often do enforce the clauses. The purpose of the article, therefore, is to increase physicians’ awareness of the potential impact of these clauses, and to encourage physicians to carefully consider whether to accept contracts that contain them, or at the very least to negotiate for the least restrictive terms possible.