United States: Is My Non-Compete Enforceable? The Answer Might Surprise You

Last Updated: May 3 2019
Article by Scott S. Addison

Non-competes are scary for anyone. I represent many medical professionals, and occasionally a physician will mention she feels stuck by a non-compete. "I am going to have to move away for two years just so that I can come back and open my own practice." When I mention the non-compete may not actually be enforceable, I generally receive a very skeptical look.

So, I thought I'd take this opportunity lay out some of the basics as to why physicians (and, perhaps, other learned professionals) may or may not be beholden to a non-compete, especially in light of the March 2019 Court of Appeals opinion, Aesthetic Facial & Ocular Plastic Surgery Center, P.A. v. Zaldivar et al.

In general, North Carolina, like most jurisdictions, allow non-competes in employment contracts. That, however, is simply a generality, and there are a number of exceptions as to when those restrictive covenants would be enforceable. The very basic requirements are that the non-compete must (1) be in writing; (2) be part of an employment contract; (3) be based on valuable consideration; (4) be reasonable in scope of time and of territory; (5) not be against public policy.

 The first two generally are not a problem . Requirement three can often be an issue. Number four and five are the most important for physicians and other professionals. 

Valuable Consideration

First, non-competes require "valuable consideration." Let's say you are in a good employment relationship, but the administration comes to you and says, "We are going to need you to sign this new contract that has a non-compete. Nothing else has changed." That non-compete is simply not enforceable because you have not given up anything in exchange for the new restrictive covenant. Even if you sign the new agreement, the lack of any consideration invalidates the non-compete.

Things get murkier if you receive anything as part of the new agreement, but it still may not be "valuable" enough to warrant enforcement of the non-compete (Would a parking spot be worth it?). The question is many times evaluated on a case-by-case basis.

Scope of Time and Territory

Moving on to scope of time and territory. The basic question courts evaluate when considering the reasonableness of time and territory is whether the restriction reasonably protects the business of the employer. If the restriction extends to 500 miles, that is clearly not reasonable. If the restriction extends to 10 years, that is also unreasonable. Additionally, if the restriction is for 2 years and within 15 miles of the business, but the covenant applies to "any parent, division, subsidiary, affiliate, predecessor, successor, or assignee" of the employer, then the lawyers drafting the non-compete have just invalidated it for their client.

If you are working for a large employer and move 100 miles away to a town where the employer has an affiliate or subsidiary but not in the same practice area as yours, that employer cannot enforce the non-compete against you because your practice does not interfere with the employer's business in that location. The reasonableness of scope has been heavily litigated, and most health care systems have fixed any problems that have arisen, but you would be surprised to see how many times the non-compete overreaches.

Against Public Policy

Lastly, what does it mean to be "against public policy"? That is such a vague and ambiguous term, but in the context of health care, the courts generally evaluate the non-compete clause to determine whether or not enforcement has a likelihood to harm the public health. Simply put, the courts want to protect all the people, not just the parties to the contract.

For physicians, that practically translates to the question: How specialized are you, and how many of you are in this community? If you are one of 300 pediatricians practicing in your city, the public is not likely to be harmed if you have to sit on the bench for a year due to a non-compete. Your patients will be annoyed and inconvenienced, but the public still has access to plenty of pediatricians.

On the flip-side, if you are one of two fellowship-trained oculoplastic surgeons who trained at one of only thirty institutions recognized by the American Society of Ophthalmic Plastic and Reconstructive Surgery, as was the case in Aesthetic Facial v. Zaldivar, then the court is going to say that the public needs you to be practicing. If the public is going to lose the ability to obtain the medical services you provide if you are forced to sit out, the non-compete will not be enforced.

Of course, there will be gray areas depending on the facts, so it is always good to consult a lawyer before thumbing your nose at a non-compete.

Good To Know

One bonus nugget of interest in this area is courts will not blue pencil non-compete clauses in the individual employment context. What that means is a court is not going to rewrite an unenforceable clause so that it becomes enforceable. For example, in one of the previous scenarios, the court would not scratch out "any parent, division, subsidiary, affiliate, predecessor, successor, or assignee" if that clause is the only portion standing in the way of an otherwise enforceable non-compete. The non-compete is either enforceable as written, or it is not.

Agreements between businesses are treated differently, so do not get confused when someone tells you that the court will find a way to fix any problems. Again, in the context of individual employment agreements, courts will not fix a non-compete clause that is unenforceable as written.

Hopefully, you will never be faced with the need to fight a non-compete agreement but at least you'll understand the enforceability of the deal a little better when you sign your life away.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
In association with
Related Topics
 
Related Articles
 
Related Video
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions