MEDICAL/LEGAL
NONCOMPETE AGREEMENT TIPS AND MISTAKES TO AVOID AFTER COVID-19 By Jeff Cohen, Florida Healthcare Law Firm COVID is proving to be so burdensome on employers that we are seeing lay-offs and furloughs all over the country. As the virus curve bends back in a positive direction and physician and patient concerns for safety wane, patients will stream back to office. But what happens to the laid off (or furloughed) employees and contractors with non-competes? Will they come back or will they have moved on, possibly in a way that violates their noncompetes? And will a court think a noncompete has been violated when an employee or contractor was let go and there is no specific provision in their written contract that allows the employer to immediately let someone go without notice due to this type of situation? How will the COVID based lay-offs and furlough affect noncompetes? The short answer is we don’t yet know, but widespread lay-offs and furloughs may result in a flood of cases being filed because (1) many have been let go, (2) there likely isn’t a provision in their contract with the employer that specifically authorizes that sort of termination, and (3) a contract’s “breach” (e.g. no contract based allowance for the prompt termination) is traditionally a defense to an action to enforce a noncompete.
5. Stopping the ex-employee from practicing in the geographic zone does not create a healthcare crisis or shortage. This is tough. Very few practice areas are in such dire straits that the departure of one doctor will adversely affect the provision of such services in the area. The big COVID issue relates to item 3 above. The situation would be (1) the healthcare professional is let go with little or notice because of COVID, and (2) the contract doesn’t specifically allow such prompt termination. In effect, the contract has been breached, and a breached contract is a primary basis for a court throwing out the noncompete enforcement action. Add to that the fact that some professionals who are breaching have a duty to minimize their economic damages, and now the whole issue of noncompete enforcement is potentially in disarray. This issue isn’t likely to be clarified until a case makes its way through a trial court, is appealed and there is a reported case (or two). Regardless, the virus is sure to spawn litigation on the issue. Noncompete Tips
The COVID Issue Though there is an exception for unusual specialties or where there is essentially a community need, noncompetition covenants are generally enforceable in Florida with respect to doctors and other healthcare professionals. Many people think doctors in particular can’t be restricted from practicing medicine under any circumstances. That is just not true. Getting to the bone of the issue, noncompetes are enforceable in Florida if: 1. The geographic zone in the noncompete is reasonable. This depends on where the practice draws its patients. If patients come to the practice from just down the street, a ten-mile radius is probably overly broad; 2. The duration is two years or less (though it can be longer in some circumstances); 3. The employer has complied with all of the terms of the employment agreement. If the employer has breached the contract that contains the noncompete, most courts will reject a claim to enforce it; 4. The employer does the type of thing that the departing employee does. If the employee is the only person performing toe surgery for instance, and the practice will not provide toe surgery services once the employee leaves, the practice probably does not have a legitimate business interest to protect by enforcing the noncompete; and
While the COVID stuff will take some time to settle out. Here are the top two mistakes that healthcare businesses and healthcare professionals make with respect to noncompetes: Mistake #1 – Racing to litigation Going to court is a crap shoot. Once litigation begins, it takes on a life of its own and costs can be nuts, sometimes in the hundreds of thousands of dollars. You may think it’s a simple noncompete case. There rarely is such a thing. And if you sue someone on a noncompete breach, they may turn around and sue you in the same lawsuit for something. And…. insurance does not cover any such claims. That means you are paying out of pocket for a lawsuit, the certainty of which can never be guaranteed and which will seem endless once you run out of patience or money for the process. If you are an employer, ask yourself the following two questions before commencing litigation: 1. Does it make good economic sense to enforce the noncompete? 2. Is there a way to work out a deal with the employee, short of litigation?
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