What to expect when you’re expecting … to dispute your noncompete
When I’m asked to handle a veterinary contract noncompetition disagreement, it always fits into one of two categories: a noncompete that’s been signed and one that hasn’t. It may sound simplistic, but this subtle distinction is a major player in determining whether the veterinarian will obtain a good outcome or an unpleasant one and whether the problem will end up being expensive or simply a temporary inconvenience.
Unsigned and unfettered
Until an employment contract is actually executed (signed), the noncompetition language remains open to discussion, negotiation and modification. The promise to refrain from competitive practice can be honed and massaged until it’s workable for both sides. For example, one large corporate veterinary chain is often willing to allow “post-employment competition” on a relief, per diem or “infrequent” basis so that a former associate can earn income while seeking a full-time position outside the circumscribed region.
And even in instances where a practice insists on a complete prohibition of practice in its perceived “service area,” the size of that area may be open to discussion. If the practice is anxious to fill a vacant position, it may be open to reducing the area covered by the noncompete clause—and maybe even the period of time its’ supposed to remain in force.
However, the situation is entirely different as soon as the noncompete agreement is signed. Once the document is approved by both parties, it tends to endure through subsequent employment contracts with the same employer and to be immutable through renegotiation.
Signed and sealed
Once an associate or partner veterinarian has executed a contract containing a noncompete clause, it’s not uncommon for circumstances to change such that the party agreeing to refrain from competing (sometimes referred to as the “burdened” party) no longer wishes to honor the noncompetition pledge. The reasons vary, but here are the most common:
The burdened party no longer feels that the agreed-to distance is fair.
The burdened party hadn’t intended to remain in the area where the job is located for more than a year or two but later meets a significant other with roots in the area.
The burdened party identifies a practice within the noncompete region that he or she feels would constitute a much better “fit” than the practice where he or she works.
What options do you have with a signed noncompete?
Let’s look at the steps involved when a veterinary practice and one of its associates or partners raises a genuine dispute over the terms and enforceability of a noncompetition term in a contract.
My use of the word “genuine” here implies that we’re talking about something that could lead to potential arbitration or litigation—not merely a theoretical dispute. This is important because in our legal system, judicial bodies generally don’t render opinions about rights of parties on a hypothetical basis. For example, a court generally won’t answer something like the following: “What would happen if I violated this noncompete? Would you, Court, hold it valid?” In our system, there usually has to be a party that finds itself aggrieved by another party. Thus, to find out whether the noncompete holds water, one side must violate it, and the other side must sue.
In order to see what happens when a veterinarian no longer wishes to honor a noncompetition agreement he’s signed, let’s look at an example.
Let’s assume that Dr. Adams, an associate, has decided that his 12-mile, three-year noncompete is unfair. He’s always viewed it as unfair, but when he took the job he'd only planned on staying a year or two before moving on. Then he met and married a local woman, and things have changed. Now he wants to work in his wife’s hometown (just not for his current employer).
If Dr. Adams honored his noncompete, the couple would have to move in order for him to find another position as an associate. Because Dr. Adams has located a better position 6.2 miles from his current employer, he wants out of the noncompete—or at least to modify it down to a six-mile practice prohibition.
He calls an experienced employment attorney and is told he has several options:
Option 1: Dr. Adams can politely ask his employer to agree in writing to refrain from enforcing the noncompete beyond six miles. If the employer wants to continue a collegial relationship with Dr. Adams, it might consider the request.
Option 2: Dr. Adams can offer to “buy out” his noncompete—say $10,000—to trim it to six miles.
Option 3: Dr. Adams can attempt to assess the factors his employer would consider in choosing whether to litigate his noncompete violation, of which there are several:
Noncompete litigation is expensive. It’s usually billed hourly by attorneys for both sides in the dispute, regardless of who prevails. Such litigation is not covered by malpractice insurance, nor does a license defense policy rider cover it.
Does the employer reasonably believe it could win a fight to enforce its noncompete? If the clinic drafted the broad 12-mile noncompete term just to scare off potential competition from past associates, it may not feel confident enough in its reasonableness (and therefore enforceability) to undertake a costly lawsuit against Dr. Adams.
Would the employer be willing to stand the social media buzz about the dispute if it sought and won a temporary restraining order against Dr. Adams (who has an extremely loyal following)? Perhaps the employer would be better off with a competitor 6.2 miles away than with losing scores of clients who’ve read about how Dr. Adams was “beaten up” by “that terrible clinic.”
Is the employer owned by a big company (or a private individual with plenty of money) that’s just waiting for a chance to prove it will sue any associate with the gall to challenge it?
Option 4: Dr. Adams can decide that he’s willing to litigate. Here’s how that could go:
First, Dr. Adams would have to find an employer willing to hire him despite his noncompete.
Second, because the veterinary community is small, it shouldn’t take long for Dr. Adams’ former employer to discover that he’s practicing in violation of the 12-mile practice prohibition.
Third, Dr. Adams and his wife will need to stay tough and not be intimidated by several registered letters from his former employer’s attorneys insisting that he “cease and desist” from the alleged violation of the noncompete terms in his employment contract. The new employer is likely to receive similar letters.
Fourth, Dr. Adams and his new boss must be prepared to both receive a summons and complaint drafted by the former employer’s law firm alleging breach of contract and several other more creatively crafted legal causes of action. There will be a demand that the court award Dr. Adams’ former employer all its legal fees from Dr. Adams if he loses at trial.
Fifth, Dr. Adams and his new employer will likely have to pay multiple thousands of dollars toward a retainer to obtain representation in the inevitable hearing for a temporary restraining order against them. These pleadings can cost thousands of dollars and may need to be prepared within a week or less from the time Dr. Adams and his new employer are served with the summons and complaint by the process server.
Sixth, oral arguments will be heard by a judge to determine whether Dr. Adams should be legally restrained from continuing to work at his new job. If a temporary restraining order is issued, a trial date will be set well into the future. During the wait, Dr. Adams will be forced to seek other work and his new boss will be indefinitely down a veterinarian.
Some parting words of advice
If you’re an associate veterinarian, the two most important terms in your employment contract are the compensation and noncompetition language. The money is nice, as are the benefits, but when you leave the job, the money issues are over. The noncompete, however, is the gift that keeps on giving. Follow these steps before signing:
Make certain you understand the noncompete fully.
Brainstorm what possible life changes could make a seemingly acceptable noncompete a genuine thorn in your side later on.
Don’t assume that the noncompete terms (distance and length of time) cannot be negotiated. They probably can.
Most importantly: Don’t assume that just because a noncompete seems unfair or unenforceable that you can get it judicially set aside. While it may be possible on a theoretical basis, the logistics and cost of doing so may make successful litigation impossible.