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Everything You Need to Know About an Employee Non-Compete Agreement

Like millions of people, watching a lot of fictionalized law shows on TV might leave you with the impression that you fully grasp various facets of the legal system and its regulations. In reality, laws and regulations can vary wildly between states, and it’s important to recognize that there are guaranteed to be far more complications than what might be explained in a crime drama. One such example is non-compete agreements, which sound pretty straightforward but can be handled differently across the country. This blog outlines what non-compete agreements are, how they’re enforced, in which states they’re illegal, and much more. 

What is a Non-Compete Agreement?

A non-compete agreement is a contract that prohibits an employee from working for or becoming a competitor for a certain period. These arrangements are enforced when a relationship between an employer and employee ends, and the employer wishes to prevent the employee from competing against them in their next position, whether working for a competitor in the same market or starting up another business in the same field.

Non-compete clauses usually contain language that limits you from engaging in competition with your employer. In the healthcare industry, for example, these provisions often preclude you from practicing within a specific distance surrounding the practice and for a specified period. Under most state laws, a practice can enforce a non-compete agreement if it meets the following criteria:

  • protects the practice’s legitimate business interest
  • is specific in geographical scope
  • has a narrowly tailored durational scope

How an Employee Non-Compete Agreement Works

Non-compete agreements overall should be both fair and equitable for all parties. They require certain information to be considered enforceable, including:

  • An effective date on which the agreement will begin
  • A reason for enacting the agreement
  • Specific dates during which the employee will be barred from working in a competitive sense and the location covered by the agreement
  • Details as to how the non-competing party will be compensated for agreeing to the termsFilling out employee forms

If your employer’s practice has more than one location, then you may be restricted within a radius from each location under your contract, even if you’ve never been to that particular location. If the language in the clause is vague or does not clearly describe the exact terms of your restrictions, the clause might be unenforceable or open to greater interpretation than either party anticipated. This is why having an attorney review your employment contract prior to signing is recommended since non-competes will greatly limit where - and when - you practice.

Which States Allow Non-Compete Agreements?

A majority of states do allow and enforce non-compete agreements, but several have specific exemptions. For example, Arizona exempts broadcasters; Florida exempts mediators; Vermont exempts beauticians; and so on.

The following states specifically exempt physicians from non-compete agreements:

  • Alabama
  • Arizona
  • Colorado
  • Delaware
  • Illinois
  • Maryland
  • Tennessee
  • Texas

In a few states, non-compete agreements are not enforced at all. In North Dakota and Oklahoma, for example, non-compete agreements are unenforceable. California has gone a step further: Not only are noncompete agreements unenforceable, but an employer who requires employees to sign them can be sued, even if the employer never tries to enforce the agreement. 

If your state doesn't allow employers to require employees to sign noncompetes, you should bring this to your employer's attention immediately – and don't sign the agreement. Be sure to verify your state’s regulations regarding non-compete agreements before implementing them in your practice.

What Happens If You Break a Non-Compete Agreement?

Generally, if you violate a valid and enforceable non-compete agreement, it is likely that your former employer will file a lawsuit against you. This lawsuit could seek compensation for money damages and actual losses suffered by your employer, it could simply seek to enforce the non-compete agreement by filing a court order against you, or could seek both money damages and a court order. In very rare cases, the court may prevent you from working for a competitor for the duration specified in the non-compete.

There could be serious legal consequences, so be sure you have appropriate counsel evaluate the agreement before signing it and advise you of professional moves after signing it.

What to Do If You Are Asked to Sign a Non-compete Contract

Bottom line, our recommendation is before you sign any papers, always have a lawyer well-versed in your particular state laws review your agreement, then negotiate something you feel is reasonable. This empowers you to be more informed of the legal ramifications of signing a non-compete agreement rather than just hoping things will work out – you’ll be saving yourself money and headaches down the line. Employee Non-Compete Contract

For example, if you’re asked to sign a broad agreement that could significantly restrict your ability to earn a living in the future, it would be well worth consulting with a lawyer to find out whether the agreement is legal and learn what steps you can take to negotiate a more limited arrangement with your employer. One of the most important factors of a non-compete agreement is the time frame it encompasses. Determine the effective dates of the agreement well in advance and seek legal counsel, as employers can set non-compete agreements only within a realistic timeline and cannot permanently prevent former employees from furthering their careers in that field.

Holistic Billing Services knows it takes a lot to run a streamlined and effective practice. Serving your patients and treating them with the best holistic approaches should always be your top priority, but sometimes massive piles of paperwork, billing errors, and insurance delays can weigh you down and poorly affect your practice.

Our experts here at HBS believe that your success is our success. From handling medical billing and coding to offering consulting services and much more, our team is dedicated to making it feel like we’re in-house. With a focus on holistic practices, insurance background, and proven consultants, our team can work with you regarding all holistic practice-related matters, and even help you navigate legal complexities like non-compete agreements. Contact us today!

June 16, 2021
 - by Antonio Arias, MBA, CHBME
Employee Non-Compete Agreement
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