The season to non-compete

Look at the terms
source-image
Dec 01, 2006

We are quickly approaching the time of year that my staff affectionately dubs the "non-compete season."

It's the time of year when two types of veterinary law clients emerge from the shadows and contact my practice in order to obtain general or detailed advice and recommendations concerning non-competition terminology they are either composing or being asked to sign.

Tis the season for non-compete advice because graduating veterinary students generally tend to defer their attention from the job hunt until after the holidays; practice owners procrastinate until after New Year's Day in beginning the recruitment search for associate veterinarians.

Additionally, we can expect a certain amount of non-competition traffic as practitioners return from winter continuing education venues (such as Florida) with the idea that selling their practices might be a better idea than facing another grueling summer.

So, with the approach of non-compete season, allow me to offer some general tips to help guide all you "non-competers" who suddenly are faced with legal paperwork that may carry important consequences.

Putting it off?

If you plan to get legal or accounting guidance, don't procrastinate.

Practice sale contracts and veterinary employment contracts almost always include non-compete language. If you are considering taking a job, offering a job, or you are buying or selling a practice, get legal and accounting advice as early in the year as possible. Attorneys who evaluate such documents get very busy in the spring. The more time we have to evaluate contractual language, the better attention we can provide regarding the subtleties and potential problems that that language could involve.

And don't forget: Signing bonuses paid to employees for agreeing to take employment and funds paid to practice sellers in exchange for goodwill involving non-competition language both carry substantial tax ramifications. Such payment arrangements may call for legal and/or accounting input.

Meanwhile, lawyers and accountants are both affected by the "spring crush" of tax time (March 15 C Corporation and Sub-S deadlines, April 15 personal and LLC deadlines). You don't want to lose a job or an associate or a practice opportunity because you held off getting an appointment.

It's a start

Always consider a proposed non-compete as a starting point, not an ultimatum.

If you have received a practice purchase offer or an employment offer that includes a non-compete, look at that non-compete terminology as a rough draft with a plethora of alternative possible permutations, not as a take-it-or-leave-it threat. There is a lot more that can be done to bring an employment or practice purchase non-compete to the point of mutual agreement than just asking for a shorter distance or duration. The language itself can almost always be adjusted to prohibit only the behavior that truly threatens the employer or buyer while offering substantial career flexibility to the employed doctor or seller.

Also, the reality of how well a non-compete negotiation goes for any party has as much to do with "presentation." If a practice owner, for example, just tosses a boilerplate contract in front of a graduating senior and mumbles that the contract is "just routine," two things usually happen.

First, an immediate cloud of doubt and mistrust covers the relationship, and the graduating doctor begins to subconsciously re-evaluate the other employment offers sitting in his or her back pocket. If that same employer had pre-emptively suggested that the new doctor read and review the terms for later discussion, the new graduate instantly would have received a sense that his or her input matters to the practice owner.