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    Protect your practice with a restrictive covenant

     

    How long can they last?

    With regard to duration, the non-competition covenant should last only as long as is needed to ensure that the departing provider is competing on the basis of his or her own skill and efforts, and not on the basis of material that he or she had access to while employed by the former practice. A rule of thumb is that the covenant should last  either for the same length of time as the term of the provider’s original contract  or for two to three years, whichever is shorter.

    How broad an area can they cover?

    Turning to geographic reasonableness, the non-competition covenant should only prohibit a healthcare provider from continuing to provide services in the same general area where he or she provided services before leaving the former practice.  A  rule of thumb, used in many states, is that the restricted area should be no larger than the area from which the old practice draws 80% of its patients.

    What about public harm?

    The non-competition covenant also must not unduly harm the public. This would occur if there were a shortage of the provider’s specialty in the subject area. For example, if a physician was the only pulmonologist in an area, then a covenant that would prevent the physician from practicing pulmonary medicine in the area for a period of time likely would be unenforceable.

    Finally, the non-competition covenant must not unduly burden the provider subjected to it. Of course, in a general sense, any non-competition covenant burdens a provider subjected to it. The question really is whether circumstances have changed since the provider entered into the covenant such that enforcing it would impose a significant, unanticipated burden. 

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