A non-compete agreement prohibits an employee from practicing or obtaining a similar job within a specific geographical area for a certain period of time after the employee leaves their current job. The geographical area is typically defined as a certain mile radius surrounding the current business’ location. 

In other words, by signing a non-compete agreement, the employee is agreeing not to join a competitor or start their own practice that will compete with their current employer. However, the size and scope of any non-compete agreement should be specifically tailored to each practice.

For many practice owners, their success will depend on how well they serve their patients and ensure those patients keep coming back. However, when practices grow, naturally the owners must rely upon their associates to help develop and maintain patient relationships. This puts the owner at risk if their associates leave to start their own practice or join another competitor in the area. 

Therefore, non-compete agreements provide several benefits to practice owners, which include:

• Protecting their current and future patient base after an associate departure; 

• Avoiding the potential loss of time, energy, mentorship, and expenses it requires to train new associates; and

• Preventing competitors from stealing associates from the practice owner.

As a practice owner, it is critical to implement non-compete agreements with incoming associates in order to protect their business.

Some prospective employees choose not to worry about non-competes because they have been told by their school, peers, and/or advisors that they are not enforceable. This is bad advice. The reason why this is bad advice is because these individuals are not considering that “being correct” is not free – in fact, it could cost the employee a lot of money in legal fees to prove a non-compete agreement is unenforceable.  

In order to break a non-compete agreement with a previous employer, it will take legal action. It is not enough for the employee to declare the non-compete unenforceable and walk away – the employee will need the courts to rule in their favor. That process is expensive, which includes the cost of filings, depositions, discovery, taking time off for court preparation, and eventually a trial. In the end, regardless of the court’s decision, the employee can expect expensive legal bills to prove their point. 

So, in the end, it is better to resolve any issues with the non-compete agreement before the parties sign the employment contract and avoid the costly litigation process.

As we mentioned above, the size and scope of non-compete agreements should be customized for any practice. One cautionary issue is when the employer has multiple office locations. All employees need to understand how that will factor into their non-compete agreement. 

If the employee is not careful, they could be agreeing that their non-compete agreement will apply for all office locations the employer owns, regardless if the employee only works at one location. Thus, if there are five office locations, a 25-mile non-compete radius could severely restrict the employee from working anywhere else in the area. Remember, even if a non-compete agreement is unreasonable, it can still be very expensive for the employee to prove that point.

In order to help contextualize how non-compete clauses (or lack thereof) could affect your future career or business, let’s give two hypotheticals: one for the employee and one for the business owner.

Upon graduation, a dentist signed an employment contract with a practice in a suburban area. After five years, the dentist gained valuable experience where patients began requesting her by name. In addition, outside of the office, the dentist got married, bought a home, and started a family in the same town.

Now, this dentist is ready to open her own practice, preferably in the same suburban area. However, low and behold, her employment contract contains a non-compete clause that prohibits her from opening a practice within a 25-mile radius for a period of two years.

At this point, there are three undesirable ways to address the problem. This dentist could:

1. Attempt to buy herself out of the non-compete with her current practice;

2. Open up a practice outside of the “non-compete zone” and face the additional struggles of restarting her practice and potentially uprooting her personal life; or

3. Litigate and argue the non-compete is unreasonable – ultimately hoping the court will agree to either nullify or severely limit the non-compete provision.

In all of these “solutions”, this dentist will face potentially tens of thousands of dollars of expenses – and that’s before she can begin to focus on building her own practice.

The better solution is to make sure your team includes a lawyer who can review all the particulars of the employment contract with you so you completely understand how your future can be affected. 

A practice owner opened their practice in a bustling urban area. This owner never put much thought into employment contracts, let alone the non-compete clauses. Instead, he hired associates without any formal employment agreement. Throughout his career, he enjoyed mentoring his associates and helping them build successful careers with the belief they would never leave. Unfortunately, over the course of ten years, multiple associates have taken that acquired skillset and left to open their own practice. What makes matters worse, the associates set up their practice right down the street and the owner is now seeing long-time patients leaving in droves to stay with the associates. Although the practice owner does not want to discourage his associates from advancing their careers – he must be able to protect his own business.

Unfortunately, without an employment agreement, this practice owner has no real recourse against these associates. Moving forward, the owner should ask potential hires about their long-term plans and work with them to help develop their skills while protecting his business. More importantly, he should work with his attorney to ensure that all future associates sign a contract that includes a reasonable non-compete agreement.