Non-Compete Agreements and Dentists (and Doctors)

Are covenants not to compete becoming unenforceable?: A growing trend explored comes from The Journal of the American Dental Association:

"The court then examined the policies of the American Medical Association (AMA), which has taken the position that physicians’ noncompete agreements have a negative effect on health care and are not in the public interest. The AMA has held the view for many years that non-compete agreements restrict competition, disrupt continuity of care and potentially deprive the public of medical services.

The court also found it curious that, despite the AMA’s stated position, a majority of courts continue to apply a 'reasonableness' standard in evaluating noncompete agreements among physicians, similar to the evaluation of such covenants in commercial contexts. Nevertheless, several states, emphasizing public policy concerns, have applied closer scrutiny to non-compete agreements involving physicians (for an example, see Valley Med. Specialists v. Farber4). Also, three states in recent years have enacted statutes totally prohibiting non-compete clauses in physicians’ contracts. In other states, antitrust statutes have been interpreted as prohibiting non-compete clauses among physicians."

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The court concluded its analysis by holding that public policy considerations such as the right to freedom of choice in physicians, the right to continue an ongoing relationship with a physician and the benefits derived from having an increased number of physicians practicing in a given community all outweigh the business interests of an employer. As a consequence, the covenant not to compete was declared void. Although most courts continue to enforce physicians’ non-compete agreements, more and more courts today are holding these covenants unenforceable for public policy reasons. In some instances, this has spread to other health care providers.⁶ At present, however, we are not aware of any cases involving dentists whose agreements have been held void because they were judged to be in conflict with public policy.

For employer and employee the best thing to do with a non-competition agreement is to make sure that it is drafted in clear language and everyone understands what the terms.

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