Non-Competes and Healthcare Providers
Non-compete clauses (also called “Restrictive Covenants”) are often used by employers to restrict where their employees are allowed to work, should they leave the business. Non-compete restrictions are governed by state law, and states vary greatly in their enforcement of these provisions. Medical professionals (doctors, physicians, psychiatrists, etc.) are uniquely situated when leaving their place of work, as they must consider the needs of their patients as well as potential enforcement of the non-compete clause.
Non-Competes in General
In Illinois, courts will enforce non-compete clauses if they are “reasonable in duration and geographic scope” and supported by “consideration” (essentially, both sides gain something and lose something by entering into the contract). Courts will look at all the circumstances when deciding whether a clause is enforceable, and they use a three-pronged test to assess the reasonableness of the restrictions placed on the employee.
- The restriction must be no greater than is required to protect a legitimate business interest.
- The restriction must not impose undue hardship on the employee.
- The restriction must not be injurious to the public.
Illinois courts have stated that the employee must have been employed for at least two years for a non-compete clause to be enforceable.
Non-Competes and Medical Professionals
Illinois case law has evolved over the last few decades when it comes to non-compete agreements, especially regarding medical professionals (including, but not limited to, physicians, nurses, and psychologists). The American Medical Association (AMA) Code of Medical Ethics Opinion states that “covenants not to compete restrict competition, can disrupt continuity of care, and may limit access to care.” The AMA further states that “physicians should not enter into covenants that: (a) unreasonably restrict the right of a physician to practice medicine for a specified period of time or in a geographic area on termination of a contractual relationship, and (b) do not make reasonable accommodations for patients’ choice of physician.” Still, many medical businesses continue to include restrictive language in employment contracts.
Courts consider all relevant factors when determining whether the business has a “legitimate business interest.” They look at the business’s operations, referrals, and relationships between the business and the physicians. Does the medical professional operate independently from the business, or do they act as one? Is the geographic scope reasonable?
Many non-competes contain geographical limitations. Again, the standard here is “reasonableness,” which is determined by looking at the employer’s market and the size of the area serviced by the employee. A restriction stating that a physician cannot work in the entire state or county would likely be considered too broad, whereas a restriction in which the physician cannot work within a five-mile radius for a set number of months or years is more reasonable.
Medical professionals have multiple concerns to weigh when contemplating whether to agree to a non-compete provision, including their future career prospects and their ethical responsibilities to their patients. We recommend speaking with an attorney to better understand the legal and practical nuances. Contact G & G Law today for more information.