Types of Restrictive Covenants
Restrictive covenants limit your activities during and after your relationship with an employer or practice buyer. Different types of covenants protect different interests and have different enforceability standards.
Noncompete (Covenant Not To Compete)
Prohibits you from practicing dentistry within a geographic area for a period after the relationship ends. The most significant restriction on your career flexibility.
Nonsolicitation of Patients
Prohibits you from actively soliciting patients of the former practice. May allow treating patients who find you independently. Often broader than noncompete radius.
Nonsolicitation of Employees
Prohibits recruiting staff from your former practice to join you. Typically easier to enforce than noncompetes because it protects specific business relationships.
Confidentiality / Nondisclosure
Prohibits sharing practice information including patient lists, fee schedules, and business methods. Usually perpetual and broadly enforceable.
These covenants often appear together. A contract might include all four types, each with different scope and duration. Analyze each separately because enforceability varies.
Factors Affecting Enforceability
Courts evaluate noncompetes based on reasonableness. Even in states that generally enforce noncompetes, unreasonable restrictions may be modified or struck down.
Reasonableness Factors
| Factor | Generally Reasonable | Potentially Unreasonable |
|---|---|---|
| Geographic Scope | 5 to 15 miles from practice location | 25+ miles or entire metropolitan area |
| Duration | 1 to 2 years | 3+ years or indefinite |
| Scope of Restriction | General dentistry or specific specialty practiced | All healthcare or unrelated fields |
| Consideration | Employment, signing bonus, or other value | No new consideration for existing employee |
Legitimate Business Interests
Courts require that noncompetes protect legitimate business interests, not merely prevent competition. Recognized interests include protection of patient relationships and goodwill, protection of confidential business information, recouping investment in training and development, and for practice sales, protecting the value the buyer purchased.
Multiple location problem: If you work at multiple practice locations, a noncompete from each location can effectively blanket an entire region. Courts may find such cumulative restrictions unreasonable even if each individual restriction seems modest. Address this during negotiation by limiting restrictions to locations where you actually worked.
State-by-State Overview
States vary dramatically in their approach to noncompete enforcement. Understanding your state's rules is essential before signing or attempting to escape a noncompete.
California
Generally prohibits employment noncompetes
North Dakota
Generally prohibits noncompetes
Oklahoma
Generally prohibits noncompetes
Colorado
Limits noncompetes, exceptions for high earners
Washington
Limits noncompetes, income threshold applies
Oregon
Limits duration and requires garden leave
Florida
Generally enforces reasonable noncompetes
Texas
Enforces reasonable noncompetes
Georgia
Enforces reasonable noncompetes
Green = employee friendly (limits noncompetes). Yellow = moderate restrictions. Red = generally enforces noncompetes. This is a simplified overview; consult local counsel for specific guidance.
Choice of Law Clauses
Some contracts specify that a particular state's law governs the agreement. A Florida employer might try to apply Florida law even if you work in California. Courts do not always honor these clauses, especially when the chosen state has no connection to the employment. If your contract includes an unfavorable choice of law clause, discuss implications with an attorney.
Employment vs Practice Sale Noncompetes
Courts treat noncompetes differently depending on context. Practice sale noncompetes are generally enforced more readily than employment noncompetes.
Employment Noncompetes
More scrutinized because of unequal bargaining power. Employee may have little choice but to accept terms. Courts more likely to narrow or strike unreasonable restrictions.
Practice Sale Noncompetes
More readily enforced because seller negotiated at arm's length, received substantial compensation, and the buyer needs protection for goodwill purchased. Broader scope often acceptable.
If you are selling your practice, expect the buyer to require a meaningful noncompete. This is reasonable because the buyer is paying for patient relationships. The negotiation focuses on scope rather than whether to include one at all.
Example: Sale vs Employment Scope
Employment context: 10 mile radius, 2 year duration typically enforceable.
Practice sale context: 15 to 20 mile radius, 3 to 5 year duration may be enforceable given the value transferred.
Questions About Your Noncompete?
Get analysis of enforceability, options for negotiation, and guidance on your specific situation.
Schedule ConsultationNegotiation Strategies
The best time to address noncompete concerns is before you sign. Once you have accepted terms, leverage shifts dramatically.
What To Negotiate
- Reduce geographic scope: Push for 5 to 10 miles instead of 15 to 20. In urban areas, even a few miles makes significant difference in available opportunities.
- Shorten duration: 1 year instead of 2. The first year after leaving is when patient relationships are strongest; protection beyond that is less justified.
- Limit to actual work location: If you work at one office, the noncompete should not cover other practice locations where you never worked.
- Add carve-outs: Hospital employment, public health positions, or specialty practice outside your current scope.
- Include termination trigger: Noncompete waived if employer terminates you without cause. Why should you be restricted if they ended the relationship?
- Buyout provision: Option to pay a defined amount to be released from the noncompete early.
Negotiation Leverage
Your leverage depends on how much the employer wants you specifically and market conditions for dental talent. Strong negotiating positions come from specialized skills or credentials, current shortage of associates in the area, competing offers from other practices, and willingness to walk away from unreasonable terms.
Even without strong leverage, asking for modifications is reasonable. Many employers will make modest adjustments to close a hire they want. You will not know unless you ask.
What Happens If You Violate A Covenant
Violating a noncompete triggers legal risk. Before opening a competing practice or taking a restricted position, understand potential consequences.
Employer Remedies
Injunctive relief. The most immediate threat is a court order requiring you to stop practicing in the restricted area. If granted, you may have to close your new practice or quit your new job. Courts can issue temporary restraining orders quickly, before full hearing on enforceability.
Monetary damages. The employer may recover lost profits, patient value, and other damages caused by your violation. Some contracts include liquidated damages clauses specifying predetermined penalties.
Attorney fees. Many contracts require the losing party to pay the winner's attorney fees. If you lose, you pay both sides' legal costs.
Before Violating A Noncompete
- Consult an attorney to assess enforceability in your specific situation
- Review the contract for notice requirements or cure provisions
- Document any employer breaches that might release you from the covenant
- Consider whether negotiating a release is possible
- Prepare for potential litigation and its costs
- Inform your new employer or partners of the risk they may share
Defenses And Arguments
If you decide to challenge a noncompete or defend against enforcement, potential arguments include the restriction is unreasonable in scope or duration, the employer lacks legitimate business interest to protect, the employer breached the contract first releasing you from obligations, inadequate consideration was provided for the restriction, changed circumstances make enforcement inequitable, and public policy concerns about restricting healthcare access.
Successful defenses exist but are not guaranteed. Litigation is expensive and uncertain. Evaluate the strength of your position carefully before relying on these arguments.
