Not all noncompete agreements are created equal


Not all noncompete agreements are created equal

Neither new veterinary school graduates nor boarded specialists should suffer with boilerplate contract language.
Jun 01, 2012

Since last month's article on noncompetition covenants, I've consulted with several other veterinarians who've taken jobs only to be faced with exactly the sort of cruel irony I discussed last month. The emails and telephone calls come from all sorts of doctors—from new graduates to double-boarded specialists—yet the story is so often the same. I'll frequently hear, "I signed a contract containing a non-compete and a salary (or percentage compensation arrangement) and now the practice's economic situation won't support my promised pay rate."

Christopher J. Allen DVM, JD
Any DVM who reads this column with any frequency knows that I bear no ill will toward non-competition clauses. While some judges and legislatures frown on these kinds of contracts for health professionals, there remain persuasive arguments for their use in many instances.

On the other hand, the principle of unintended consequences is alive and well in this area of the law. You don't need to field desperate phone calls from newly employed veterinarians to recognize why the concept of the non-compete is increasingly vilified.

But it's not the legal language or the players involved that has changed the employment relationship. What has changed—and dramatically so— is the economy. The Great Recession of 2008 has altered the employment dynamic in ways that are far from obvious for employers and associates alike. Let's look at how this chronically slow economy has made non-competition clauses more onerous than in the past.

Location, location, location

Consider that whether one is a new graduate or a board-certified specialist, the decision of where to work is a major life choice—and sometimes such a choice for more than one person in a household. It ordinarily means a lease or a mortgage, difficult decisions for spouses and partners as to whether to move or stay put, and potentially, an impact on partners' respective careers and educations. And usually attached to veterinarians' ankle is an almost-real ball and chain: the non-competition obligation preventing them from working nearby if their current job doesn't work out.

For many years, when the economy was stable and clients were plentiful, associates almost always stayed on at any job they took under contract, at least for the agreed contract period. If they left, it was due to a lack of "chemistry" with the employer or because both parties couldn't agree to a subsequent year's compensation level.

Now, though, a new factor is causing employed veterinarians to leave jobs—unexpected economic hardships their employers experience. As our economy continues to behave anemically and unemployment remains high, average transactions and client visits drop, and associates who have been recently hired find themselves at risk for losing their jobs due to a layoff. Further compounding this issue is that associates remain shackled by non-compete language.

Today more than ever, veterinary associates and their families are just getting past the economic hardship of moving to a new town when sudden unemployment hits. Savings are depleted and one or more children may be enrolled in a new school district when—BAM!—Mom or Dad gets laid off by their clinic employer and can't go to work anyplace else nearby because of their employment contract's non-compete.

Remember that in most cases, non-competition covenants continue to remain in effect long after the employment relationship has ended.