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.
We look forward to receiving more of your health law questions. If you have a question, please submit it to the Health Law Gurus™ at healthlawgurus@obermayer.com.
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.
Lawrence is the Chair for Obermayer’s Health Care Law Department and Election Law Practice Group. Lawrence’s Health Care Law legal experience includes the representation of Pennsylvania County governments in Behavioral Health Managed...
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