New York Healthcare Law Blog

As an increasing number of physicians forgo the uncertainties of private practice for employment, the issue of noncompete clauses and restrictive covenants in physician employment agreements becomes more and more urgent.

Physician-run group practices, as well as larger employers, are primarily concerned with minimizing the chances of former physician-employees becoming competitors. For an individual physician seeking employment, however, noncompete agreements pose special and possibly even career-threatening dangers, particularly when they aren't given serious attention during the negotiation of the physician employment agreement.

In short, agreements not to compete limit a physicians right to practice within a certain geographic radius of his former employer's location for a specific period of time. In New York, the legality of a restricted covenant in a physician employment contract is typically decided by the courts, after the physician-employee's challenge that his right to practice in the marketplace has been unreasonably restricted.

The courts generally apply a three-pronged test to decide whether a noncompete clause is reasonable: 1) Does the restrictive covenant protect a legitimate business interest of the employer? 2) Does the restrictive covenant impose an undue hardship on the employee? and 3) Is the restrictive covenant injurious to the public at large?

While this test poses very broad and open-ended questions, a court's determination is heavily influenced by the noncompete clauses and the unique factual circumstances surrounding an individual employment arrangement.

Therefore, doctors seeking employment can and should protect themselves, particularly as noncompete agreements and other restrictive contract provisions become more commonplace. Physicians facing employment contracts are strongly urged to contact our firm for competent legal counsel to clarify the state law limitations on the use of the restrictive covenants, as well as to gain a better understanding of his or her bargaining position.