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July 22, 2007
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Signing a non-compete agreement
By Jean Murray, PhD

A non-compete agreement is probably the most controversial part of any contract. It’s very difficult to set a general rule and courts won’t enforce the agreement unless it’s “reasonable.”

Let’s first discuss the general terms of a non-compete agreement. This part of an employment contract is designed to protect the hiring doctor in case you decide to leave and you “steal” his or her patients.

Non-compete agreements usually take the form of a restriction on three factors:

  1. Scope of activity (practicing chiropractic vs. practicing a specific technique),
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    Range of activity (prohibiting practice within a certain radius from the practice), and
  3. Period of restrictions (length of time).

WHAT’S REASONABLE?

Here’s where it gets tricky: What is a “reasonable” restriction? Most of these agreements broadly restrict “practice of chiropractic.” In regard to time period, in most cases, two years or less would be considered a “reasonable” time to prohibit you from practicing.

The distance restriction is more problematic, since it depends on the area. In an area that has a lot of people, such as a suburb, the area of restriction might be no more than five miles. In a rural area, the restriction might be as much as 25 miles.

Non-compete agreements are written based on the concept of “restraint of trade.” If the non-compete unreasonably restricts the former employee’s ability to practice (that’s restraint of trade), it isn’t going to be upheld. If the former employee merely engages in “ordinary competition,” that is, the same level of competition as any other chiropractor setting up practice in the area, prohibiting the former employee from practicing is unreasonable.

On the other hand, if it can be proven that the former employee took patient files and solicited patients, that’s unfair to the former employer and goes beyond “ordinary competition.” (Clear so far?)

So how do you know what’s reasonable? That’s the problem; you don’t. Let’s say you have signed a non-compete agreement that says you can’t practice chiropractic for two years within 25 miles of the other doctor, and you are in Golden, Colo. Technically, if you decide to set up practice in Boulder (a little more than 20 miles away), you may be in violation of the contract.

The way this is decided is through a court case. This means that you would move to Boulder and set up practice. The other doctor would see that you’ve done this, and he would get the court to issue an injunction against you, shutting you down, and prohibiting you from practicing and damaging his practice, until this is settled.

This might take months, if not years. The case goes to court, and the judge or jury make the determination of whether to uphold the non-compete, based on whether they think it unreasonably prohibits you from practicing.

Even if you win, you lose, because you’ve been shut down; you have many attorney fees to pay; and you have to rebuild your practice.

You may have heard that non-compete agreements are illegal. That’s not true. They are just very difficult to enforce. Courts decide enforceability on a case-by-case basis, and the burden of proof is on the former hiring doctor to prove that the non-compete is not unreasonable.

The best recourse is to go into an associate contract knowing that you’ll have to move far away from this practice when you leave. If the non-compete is 25 miles, double the distance to 50 miles. Play it safe.

Some examples of articles from attorneys on this issue:

• Non-Competition Contract, Trade Secret Lawyer, Attorney, Law Firm: tcattorney.typepad.com/noncompete/ (Michigan)

• Non-Compete Agreements in Texas - FAQ Smith Robertson Trial and Litigation Practice Group: smith-robertson.com/Litigation/FAQ%20Non-compete.htm (Texas)

• Are Non-competition Agreements Enforceable in Colorado Newsletters and Articles: rothgerber.com/newslettersarticles/el009.asp (Colorado)

• Employer-Employee Non-Compete Agreement in Florida, By Donald J. Spero, Esq.: floridamediationgroup.com/articles/spero/2000_Employer_employee_non
-compete_agreements_in_florida.html
(Florida)

To find out about non-competes in your state, go to Google and type in “non compete agreement” and the name of your state.

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