Ask the Health Law Gurus™: What is a Non-Compete Clause in an Employment Contract? Is it Enforceable?
Question: I have heard about non-compete clauses being negotiated in employment agreements with physicians. What is a non-compete clause? What does it mean if my contract has a non-compete clause?
Answer: A non-compete clause is a contract provision that limits an employee’s activities after the termination of his or her employment relationship with an employer. Non-compete clauses generally contain both a temporal and a geographic limit. For example, a physician’s employment contract with a hospital may state that if the physician terminates his employment relationship with the hospital, the physician may not provide the same services he provided while employed by the hospital within a five mile radius for a period of one year after the termination of the employment agreement. The language of the contract will determine under what circumstances the non-compete clause is triggered. For example, the non-compete clause may not be triggered if the employee is laid off, but it may be triggered if the employee decides to quit his current job because he gets a better job elsewhere.
The next question is: Are non-compete clauses enforceable? Generally speaking, non-compete clauses are viewed by Pennsylvania courts as a restraint on trade. Therefore, Pennsylvania courts will examine non-compete clauses closely and enforce them only when they are narrowly tailored to protect an employer’s legitimate interest. A non-compete clause cannot be used to prevent all competition with a former employer. Instead, it must be limited in time and in geography to protect an employer’s trade secrets, confidential information, good will, and/or the unique skills and training it provided to the employee. Generally speaking, Pennsylvania courts will not enforce a non-compete clause that last more than one or two years.
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DISCLAIMER: This post, and any other answers we provide in response to our readers’ questions, is only intended to provide a basic explanation. It does not constitute legal advice. Please consult a health law attorney for advice specific to individual circumstances.