Hostname: page-component-586b7cd67f-l7hp2 Total loading time: 0 Render date: 2024-11-26T05:38:23.890Z Has data issue: false hasContentIssue false
  • English
  • Français

The Legal, Ethical, and Practical Implications of Noncompetition Clauses: What Physicians Should Know before They Sign

Published online by Cambridge University Press:  01 January 2021

Derek W. Loeser
Get access Rights & Permissions [Opens in a new window]

Extract

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.

Type
Article
Information
Journal of Law, Medicine & Ethics , Volume 31 , Issue 2 , Summer 2003 , pp. 283 - 291
Copyright
Copyright © American Society of Law, Medicine and Ethics 2003

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Lotenfoe v. Pahk, 747 So. 2d 422, 425 (Fla. Dist. Ct. App. 1999).Google Scholar
Merrill Lynch, Pierce, Fermer & Smith Inc. v. Chung, 2001 WL 283083, at *4 (C.D. Cal. 2001) (citing MAI Systems Corp. v. Peak Computer, Inc., 991 F.2d 511, 521 (9th Cir. 1993)).Google Scholar
See, e.g., Pahk, 747 So. 2d at 424.Google Scholar
Handler, M., Lazaroff, D.E., “Restraint of Trade and the Restatement (Second) of Contracts,” New York University Law Review, 57 (1982): 669–766, at 721 (citing Carpenter, , “Validity of Contracts Not to Compete,” University of Pennsylvania Law Review, 76 (1928): 244–58, at 244–45).Google Scholar
Handler, and Lazaroff, , supra note 4, at 721–22.Google Scholar
Id. at 723.Google Scholar
Id. at 724.Google Scholar
Mitchel v. Reynolds, 1 P. Wms. 181, 191, 24 Eng. Rep. 347, 350 (Q.B. 1711).Google Scholar
However, several states, including California, Montana, North Dakota, and Oklahoma, have enacted statutes declaring noncompetition agreements void. See Cal. Bus. fie Prof. Code § 16600 (West 1987); Mont. Code Ann. § 28-2-703 (1995); N.D. Cent. Code § 9-08-06 (1987); Okla. Stat. Ann. tit. 15, § 217 (West 1993).Google Scholar
JAK Productions, Inc. v. Wiza, 986 F.2d 1080, 1085 (7th Cir. 1993).Google Scholar
Knight, Vale and Gregory v. McDaniel, 680 P.2d 448, 452 (Wash. Ct. App. 1984).Google Scholar
Id.Google Scholar
Id.Google Scholar
Id.Google Scholar
See, e.g., Sigma Chemical Co. v Harris, 586 F. Supp. 704, 710 (E.D. Mo. 1984) (former employee was a chemical buyer for a company that sold esoteric chemicals used in hospitals, universities, and laboratories worldwide).Google Scholar
Wiza, 986 F.2d at 1087.Google Scholar
Id.Google Scholar
Bridgestone/Firestone, Inc. v. Lockhart, 5 F. Supp. 2d 667, 683 (S.D. Ind. 1998).Google Scholar
Valley Medical Specialists v. Farber, 982 P.2d 1277, 1286 (Ariz. 1999) (quoting Blake, H. M., “Employee Agreements Not to Compete,” Harvard Law Review, 73 (1960): 625–91, at 682–83).CrossRefGoogle Scholar
Id.Google Scholar
See, e.g., Wood v. May, 438 R2d 587, 592 (Wash. 1968).Google Scholar
Ikon Office Solutions, Inc. v. Dale, 170 F. Supp. 2d 892, 895–96 (D. Minn. 2001), aff'd, 22 Fed. Appx. 647, 2001 WL 1269994 (8th Cir. 2001).Google Scholar
Id.Google Scholar
Model Rules of Prof'l Conduct R. 5.6 (1990). Most jurisdictions base their codes of legal ethics on the Model Rules, or its predecessor, the Model Code of Professional Responsibility.Google Scholar
Model Rules of Prof'l Conduct R. 5.6 cmt. (1990).Google Scholar
Dwyer v. Jung, 336 A.2d 498, 500 (N.J. Super Ct. Ch. Div. 1975).Google Scholar
Id.Google Scholar
Code of Medical Ethics, Council on Ethical and Judicial Affairs Op. E-9.06 (issued prior to April 1977).Google Scholar
Council on Ethical and Judicial Affairs Op. E-10.01 (1993).Google Scholar
Council on Ethical and Judicial Affairs Report l-A-01 (June 2001), available at <http://www.ama-assn.org/ama/upload/mm/369/report_116.pdf>. The quoted language was adopted as AMA Ethics Policy at the 2001 Annual Meeting of the AMA House of Delegates..+The+quoted+language+was+adopted+as+AMA+Ethics+Policy+at+the+2001+Annual+Meeting+of+the+AMA+House+of+Delegates.>Google Scholar
Di Dio, A.S., “The Legal Implication of Noncompetition Agreements in Physician Contracts,” Journal of Legal Medicine, 30 (1999): 457–77, at 475–76.CrossRefGoogle Scholar
Id. at 457.Google Scholar
Council on Ethical and Judicial Affairs Op. E-9.02 (June 1998).Google Scholar
Arthur Murray Dance Studios of Cleveland v. Witter, 105 N.E.2d 685, 703–04 (Ohio Com. Pl 1952).Google Scholar
See supra note 9.Google Scholar
Colo. Rev. Stat. Ann. § 8-2-113(3) (West 1986); Del. Code. Ann. tit. 6, § 2707 (1993); Mass. Gen. Laws Ann. ch 112, § 12X (West 1991). See Johnson, X., “Noncompetition Clauses in Physician Employment Contracts in Oregon,” Oregon Law Review, 76 (1997): 195–206, at 200.Google Scholar
Karlin v. Weinberg, 390 A.2d 1161, 1169 (N.J. 1978).Google Scholar
See Di Dio, , supra note 31, at 473.Google Scholar
Karlin, 390 A.2d at 1166.Google Scholar
Pittman v. Harbin Clinic Professional Ass'n, 437 S.E.2d 619, 622–23 (Ca. Ct. App. 1993).Google Scholar
Fields Foundation, Ltd. v. Christensen, 309 N.W.2d 125, 133 (Wis. Ct. App. 1981).Google Scholar
Canfield v. Spear, 254 N.E.2d 433 (Ill. 1969).Google Scholar
Farber, 982 P.2d 1277.Google Scholar
Id. at 1279–80.Google Scholar
Id. at 1286.Google Scholar
Id. at 1283.Google Scholar
Id. at 1282.Google Scholar
Id. at 1283. See Ohio Urology, Inc. v. Poll, 594 N.E.2d 1027, 1032 (Ohio Ct. App. 1991) (finding that physician noncompetition agreements “should be strictly construed in favor of professional mobility and access to medical care and facilities”).Google Scholar
Farber, 982 P.2d at 1286.Google Scholar
Id.Google Scholar
Id. at 1285; Carter-Shields v. Alton Health Institute, 739 N.E.2d 569, 577 (Ill. App. Ct. 2000) (invalidating noncompetition clause on the ground that “it would deprive at least some patients of an ongoing relationship with the physician of their choice, and thus, is contrary to public policy”).Google Scholar
Farber, 982 P.2d at 1285.Google Scholar
Statesville Medical Group, P.A. v. Dickey, 418 S.E.2d 256, 260 (N.C. Ct. App. 1992).Google Scholar
Id.Google Scholar
Ellis v. McDaniel, 596 P.2d 222, 224–25 (Nev. 1979).CrossRefGoogle Scholar
Karlin, 390 A.2d at 1169.Google Scholar