The Dental Shopper Blog

Can You Compete?

Monday, December 10, 2012

Are non compete clauses in an employment contract enforceable? By Douglas J. Pettibone, Esq

Who Gets the Patients?

After termination of employment, a contractual non-competition clause is usually unenforceable. Under California law, a doctor ordinarily may compete with his or her prior employer or group, even if the doctor signed an agreement that prohibits competition. Of course, there are exceptions to this rule. A non-competition clause can be enforceable if it was (i) entered into as part of the sale of a business; or (ii) entered into pursuant to a partnership agreement or shareholders agreement that prohibits a withdrawing doctor’s competition in a limited geographic area.

A prohibition on competition may be unenforceable, but the departing doctor may not engage in unfair competition. Unfair competition includes the use of confidential information and trade secrets of the former employer. In general, the law will prohibit a doctor from using the patient list of the former practice, but only if the following two elements exist: (i) the patient list was a trade secret; and (ii) the former doctor misappropriated the list.

Who Retains the Rank and File Employees?

The rule with respect to the solicitation of employees is similar to the rule for the solicitation of patients. California law protects the right of employees to change employment. A departing doctor may not solicit or ask the employees to leave the former group. Rather, the departing doctor may only announce his or her plans. The doctor must then back off and allow the employees to initiate the next contact.

Finally, please keep in mind that the law of competition is by its very nature fluid and gray. There are few hard and fast rules, and no guarantees can be given on the outcome of any particular dispute. The costs of litigation (let alone losing in litigation) are such that one does best to avoid it altogether. Therefore it is imperative to keep this common-sense advice in mind: behave in a decent and fair manner, and well within the boundaries of the law. In the final analysis, courts try to protect persons who have acted with decency.

This article only gives a short roadmap of the issues raised by a departing doctor’s competition with his or her former group or employer. There is a lot more to this subject than introduced here. Before you do anything, get competent legal counsel to help you.

Douglas J. Pettibone, Esq.
Pettibone & Associates

Please Note: Items on this blog are not necessarily the opinion of The Dental Shopper or its staff. These items may be controversial and are here for the purpose of free discussion of ideas and concepts.
Dr. Lon Uso, owner.

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