Can I practice within the range of my restrictive covenant?

October 11, 2012

Question:

Jennifer,

I am leaving my current position and want to open my own practice, but the space I have found is within the 2 miles of my restrictive covenant in my current employment contract.  I am leaving my current practice because I want out but mainly want out because my employer has not paid me as promised.  Is the restriction still valid?

Thanks,
Dr. C

Answer:

Dr. C, I am answering this question generally because I have not reviewed your employment contract and have not seen the restrictive covenant section.  You have indicated that your current employer may, in fact, be in breach of your employment contract.  If that were the case and you were to then open your practice in the restricted area, should the employer seek an injunction restraining you from practicing within the restricted area, one of our first defenses would be that the contract is no longer enforceable because of the Employer's breach.  However, you may still be found to be in violation.  Restrictive covenants are only upheld if they are found to be reasonable in time duration and geographic range, which is determined based on the damage your operation will inflict on your employer's business, the number of other practitioners in the same specialty in the geographic area, as well as other factors.    A main issue that I see with your proposed question is that you have also indicated you are undertaking opening your own practice, which is an enormous expense and commitment.  I would not recommend expending same without ensuring that you will not be enjoined from operating at that location.  The best advice I can give at this stage is to have your contract reviewed and discuss specific strategy to your situation.  You may want to notify the employer of your intentions and seek release of the restriction in exchange for releasing the employer from obligations of monies owed to you.  You may also want to reconsider operating within the restricted area.

Unfortunately, there is no easy answer here.  The best advice I can give is to advise those reading to take your contract provisions very seriously at the inception of any arrangement.  Do not commit yourself to an onerous restriction you could anticipate restricting you in the future.  Had this restriction been addressed in advance, it may have been negotiated down to a palatable range.  If your practice is in midtown Manhattan, 2 miles will certainly alter your practice options significantly, and such a range likely could have been lessened at the outset.  Bottom line, before proceeding with your new venture in the restricted range, carefully consider all options, including working out an agreement with your prior employer.  The risk of litigation over a potentially enforceable covenant may not be the best start to  your new practice.  Then again, if you are feeling litigious, you could seek a declaratory judgment (from the court) that the restriction is unreasonable and should not be enforceable....