What happens if I breach the restrictive covenant in my employment agreement?
April 7, 2011
I'm thinking about leaving my current medical practice and joining a competing practice. The competing practice is within the area my contract says I'm not allowed to work for 2 years after leaving this practice. What's my exposure if I decide to move to the competing practice? Is this something I can negotiate out of?
Dr. S, this is a great question, with a two lawyer perspective answer for completeness sake. My answer as your transactional attorney is – why the heck did you sign a prohibitive contract in the first place???? Now that I’ve gotten that out of the way, I really can’t answer you without looking at the contract. But, since this is a great questions, I will answer generally for the benefit of the listserv, and will answer you specifically once you send over the contract.
In a bind like this, I generally recommend thinking long and hard about the most fruitful way to approach the practice owner(s) and try and negotiate a way out of your restriction. If we come to a reasonable agreement, whereby you would possibly offer a monetary amount to buy your way out of the contract, maybe your current practice will let you go. Don’t forget, any subsequent agreement with your current practice MUST be in writing to protect you.
The second leg of this question – potential legal action – I asked Tal Hirshberg of our office to comment on and he provided -
Dr. S, you’re in a tough spot. Without reviewing the contract, my general comments are that a properly written and narrowly defined non-compete may be tough to get out of. From a litigation standpoint, for the provision at issue to be enforced, your current practice would have to go to court to enforce the restriction against you, which would be an aggressive and litigious step that most people will try to avoid as its costly. If the practice did pursue the issue, right off the bat would need to retain legal counsel to defend you in the litigation. Not to mention that if the practice were successful, you may be liable for liquidated damages and costs.
To give some background on how a party would prevail in a an action such as this - for the restrictive covenant to be upheld, a judge would have to determine that the restriction is reasonable in geographic range and time frame. Factors a judge may consider are how many other providers in the area provide the same services and the potential for your damaging your current practice through competition. The more crowded your area is with doctors of your specialty, the higher the likelihood a burdensome restriction would not be enforced. But, if you’re practicing outside of Buffalo, NY right now and you are a pediatric oncologist and one of the few in a 20 mile radius, a 20 mile restriction may be upheld, whereas if you were practicing in New York City, a 20 mile restriction would be considered ridiculous. Unfortunately, the main issue here is if your current practice looked to enforce the restriction, before getting a judge to determine the restriction invalid would cost time and considerable money. Litigation is not cheap. To conclude, take Jennifer’s advice next time and be sure to negotiate a better contract.
For additional information on this topic, contact Jennifer Kirschenbaum at (516)-747-6700 ext. 302 or at Jennifer@Kirschenbaumesq.com.
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Contact Jennifer at Jennifer@Kirschenbaumesq.com or at (516) 747-6700 x. 302.
at a residency/fellowship program?
Contact Jennifer directly at (516) 747-6700 x. 302 or at Jennifer@Kirschenbaumesq.com