Issue 8 - June 2004

Ask the Attorney By Todd Crabtree, DC, JD, MBA
Consider an exit strategy when you hire an associate

I want to add a chiropractor associate to my clinic. Do I need a non-compete clause in my employment agreement?

Whenever you hire an associate, you should always consider your exit strategy. No associate relationship lasts forever. A written employment agreement that lays out the obligations and duties of both parties can prevent misunderstandings between you and your associate. Even if your associate becomes an owner of your practice, it is still wise to have a non-compete agreement in place for leverage in ownership price negotiations.

Three different types of clauses in an employment contract can help protect your business and patients: a non-compete provision, a trade secrets provision and a non-solicitation provision.

• Non-compete provisions. These provisions are generally designed to prevent a former employee from competing directly against you. A typical non-compete provision restricts the future practice of the associate both in time and distance.

For example: The provision may state that the associate will not practice within five miles of your practice for a period of one year following termination of employment.

Judges generally scrutize non-compete agreements carefully, since they restrain trade and interfere with an individual’s ability to earn a living.

They look to see if legitimate employer interests exist that need protection, such as confidential patient information, trade secrets or business goodwill.

Most states require that both the distance and time provisions of the non-compete agreement be reasonable.

In some states, judges are allowed to “pencil in” different time and distance provisions if they conclude that the original provisions are unreasonable. Judges in other states have the authority to eliminate non-compete contract provisions.

What is reasonable distance and time? That varies from state to state, from judge to judge and depends on the individual circumstances. A judge reviews multiple competing interests when they make a determination concerning the reasonableness of a non-compete clause.

• Does the distance requirement cover more geographic area than the local current patients are drawn from?

• Does the time requirement extend beyond a decent interval to protect the business interests of the clinic?

• Does the agreement balance the business interests of an established clinic, an associate’s right to engage in business freely and earn a living and protect the patient’s choice to treat with the provider of their choice?

• Trade secrets provision. This contract provision includes an acknowledgement by the associate that the names and addresses of the clinic’s patients are a valuable trade secret and that the sale, unauthorized use or disclosure of that information constitutes unfair competition.

• Non-solicitation provision. This prohibits the former associate from soliciting the clinic’s patients and employees upon termination. Solicitation may include telephone calls, mailings or in-person contact.

A wise exit strategy and thoughtfully drafted employment contract can ease your concern when hiring an associate.

Each state has laws regulating non-compete provisions for professionals. Consult your local counsel to see what your state allows.

Todd Crabtree, DC, JD, MBA, is the founder of Crabtree Law Firm PA, specializing in personal injury, and Clinic Doctor Inc., an outsource business service provider offering chiropractors customized marketing, practice management consulting, billing and claims denial management. If you have a question of general concern that you would like to have addressed in this column, he can be reached at 800-899-5859 or by e-mail at Todd@CrabtreeLawyers.com