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Examples of How States Have Different Views on Non-Compete & Restrictive Covenants for Physicians

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Wrapping up our look at restrictive covenants within employment contracts, it’s time for a brief overview at how different states regulate these covenants. As Randi W. Kochman and Lauren M. Manduke note over at Physician News Digest, “Some states have specific statutes that address the enforceability of physician restrictive covenants.”

One Texas statute demands 100 percent compliance in relation to restrictive covenants, and if compliance slips in any way, the covenant is automatically discarded. This same statute “requires that the physician have the right of access to a list of treated patients seen in the preceding year, and there must be a reasonable buy-out of the physician.”

Like the Texas statute, Tennessee is similarly favorable to physicians in that its restrictive-covenant statute declares “a Tennessee practice shall not restrict the physician’s right to practice medicine upon the termination or conclusion of the relationship unless certain exceptions and/or circumstances apply.” This statute draws geographic limits at the county in which the practice is located or within a 10-mile radius from the practice, “whichever is greater.”

States That Ban Restrictive Covenants on Employed Physicians

There are three states that actually ban restrictive covenants in physician contracts: Massachusetts, Delaware, and Colorado.

According to the authors, “New Jersey law also prohibits restrictions on psychologist and psychotherapist restrictions because the Legislature has banned such proscriptions by regulation.”

Then, there are the so-called “blue-pencil” states, such as New Jersey, New York, Pennsylvania, Ohio, and Oregon.

“While ‘blue-pencil’ states may modify restrictive covenants, these states also typically have the option of completely throwing out an overreaching restrictive covenant,” the article states. “Arkansas, Georgia, Nebraska, Virginia, and Wisconsin, while they will enforce restrictive covenants, are not ‘blue-pencil’ states and in those states an unreasonable restriction is void per se.”

Above all, the authors urge, there is no “one-size-fits-all” physician-employment contract or restrictive covenant. Each one is unique to that particular practice, hospital, and physician. Therefore, each contract should keep each parties’ interests and that state’s laws in mind. Also, “the nature of the physician’s practice” or hospital should be taken into account as well.

Remember, as the physician, it is in your power to limit the terms of the restrictive covenant and its application. You alone are the one who has to agree the terms to which you are signing are reasonable.

Don’t harm yourself in this respect. Be knowledgeable about what you are agreeing to before putting your pen to paper.

As physicians looking for jobs, what in your mind is a reasonable restrictive covenant? How would you seek to limit the terms and application of such a covenant?

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