A restrictive covenant is a contract between an employee and employer that protects the employer from future losses when the employee leaves. These are common when new physicians work for large practices and hospitals because in time, the physician will move on to another practice or start a private practice of their own. Although the use of a contract is understandable, not all are reasonable and should be negotiated prior to signing. Physicians are advised to have a qualified health care lawyer review their employment contract before signing a restrictive covenant.
Employers are understandably protective of their client base. A restrictive covenant generally stipulates that the physician may not encourage patients to move their accounts to his or her new practice. Another common element in a restrictive covenant is a stipulation that prohibits the physician from opening a new practice within a certain distance from the employer. Finally, most contracts provide a time-frame during which these restrictions remain in place.
Reasonable and Unreasonable in Restrictive Covenants
A restrictive covenant should not place an undue burden on a physician. Concerning the restriction on soliciting patients from the former employer, the agreement should not state that patients may never use the physician, because that would place a restriction on the freewill of the clientele. They should be entitled to go to whichever clinic they choose. However, the agreement may stipulate that the physician not solicit patients nor use any proprietary information such as referral sources. Likewise, the physician may be restricted from soliciting other employees.
Most agreements remain in place between two and three years. If the duration under which restrictions remain are excessively long, the courts may nullify or modify the agreement. For instance, an agreement that calls for non-competition for twenty years would be unreasonable by most standards.
The most difficult part of a restrictive covenant is the geographic condition. Most require a physician to refrain from establishing a private practice within a certain number of miles’ radius. What is reasonable in these cases depends largely on the population within that area.
In a city, such as Philadelphia or New York, a 20-mile radius would encompass millions of prospective patients and may be considered unreasonable by the courts. The same radius restriction from Allentown, Pennsylvania would prevent the physician from practicing anywhere in that city. Such a covenant may or may not stand up in court, but a physician should be aware of the restriction because it means that opening a new practice may require moving.
Philadelphia Health Care Lawyers at Sidney L. Gold & Associates P.C. Help Physicians Understand Restrictive Covenants
For three decades, the Philadelphia health care lawyers at Sidney L. Gold & Associates P.C. have negotiated for both sides in restrictive covenants. We understand what is reasonable and can help you know what to expect from any agreement you are asked to sign. Before you sign a restrictive covenant, let us review it. From our conveniently located Philadelphia office, we serve clients in New Jersey, Pennsylvania, and New York. Contact us online or call 215-569-1999 today to arrange an appointment with one of our seasoned and dedicated health care lawyers in Philadelphia.