Thoughts on Central Indiana Podiatry, Non-Competes, Garden Leave, and Physician Employment Contracts

Having finally posted on Central Indiana Podiatry v. Kenneth Krueger, I wanted to write on some points tangential to reporting on the particular case but which might I see bearing directly on physician employees. I think this case - and every similar case - may have been better served with a garden leave provision.

I have been working on a post on garden leave. For now let me use this definition from Wikipedia (it states with succinctness what I have read in more scholarly sources):

Garden leave (or gardening leave^[1]) describes the practice of instructing an employee who is leaving an employer (following a resignation, or having been made redundant or otherwise terminated) to stay away from work during their notice period. The practice is often used to prevent employees from working for the employer's competitors for a period of time.

Garden leave comes to us from the United Kingdom and has not yet made much of inroad into our law.

Why should such a concept work with physician employees?

1. In Central Indiana Podiatry, there was an employee contract.
2. Unlike salesmen contracts, there was a salary provision.

I suggest also reading my Noncompetition Agreements: Lexington Clinic sues former director and the case described there. I may overreach with my extrapolations regarding salaries and employment contracts but then my presumptions do not apply to those exceptions.

I see non-compete agreements where the employee is not working for a set term (therefore, no period for the garden leave to operate within) and/or is working on a commission basis (therefore, cannot establish an amount to be paid during the leave). Flipping around the problems, I say there is an opportunity with cases like Lexington Clinic and Central Indiana Podiatry.

I will speculate a bit further now about two other benefits I see garden leave having over a non-compete agreements.

First, I think a garden leave provision alleviates but probably does not remove the ethical concerns raised in Central Indiana Podiatry (and which have been raised elsewhere - see my post Non-compete Agreements - The Medical Field) about non-compete agreements.

Secondly, I cannot help but think that the costs of a gardening leave provision pale in comparison with the costs of a non-compete agreement. I see the costs of a gardening leave provision as being the cost of drafting the agreement plus the wages and benefits paid to the employee during the leave period. Compare that with the costs of a non-compete agreement in Central Indiana Podiatry: drafting the agreement, litigating the agreement, and losing because in Indiana non-compete agreements turn on the facts of each case. I expect the costs for litigating Central Indiana Podiatry exceeded $150,000.00 and would not be surprised if they reached even higher.

Downside? Using a tool new to Indiana is the first one coming to mind. That garden leave will not serve as a panacea for all cases.

As I see it, our law on non-competition agreements grew out of English law. Adopting garden leave from the English may be even easier - garden leave lacks the explicit harshness of restraining a person's trade.

As for being a panacea, nothing ever solves all of our problems. The true test for garden leave lies in whether this tool provides better benefits than non-competition agreements.