Noncompete clauses have been in the news ever since the Federal Trade Commission (FTC) took the unprecedented step of banning them earlier this year. In a decision widely decried by business owners as unfair, this centuries-old legal practice is slated to expire August 2024 when it can no longer be used to restrict anyone's right to work where they choose (except under strict circumstances).
While the decision has already been appealed and the ban is by no means a certainty, veterinary practices have been widely contemplating the potential demise of this practice and what it means for both veterinary associates and practice owners alike.
A look at the impact
To practice owners, the loss of noncompetes will mean their associates will no longer be geographically restricted once they are no longer employed. The risk of direct competition will become a much greater hazard.
For associates who will no longer have to sign contracts with this kind of legal verbiage included, work after termination of employment cannot be challenged by their old employer. They will be free to be employed—or employ themselves—wherever they choose, regardless of proximity.
All workers should be free to compete, says the FTC. Yet, if you own a vet practice, the loss of a key associate to a practice nearby can mean a serious dent in the owner's business when clients start searching for their "favorite vet." According to the FTC plan, noncompetes will not apply even if the associate starts their own practice just down the block.
While noncompetes were created to protect employers, they're designed to keep everyone ethical, too. After all, it's not considered ethical for associates to enjoy the benefits offered by a long-standing practice's marketing, reputation, and teamwork—the foundation of a client base—only to "steal" all their dedicated clients away to a new nearby location. The practice has financially invested in acquiring, satisfying, and maintaining these clients. It's not considered fair for an associate to take them when they leave the practice.
However, not all noncompetes are fair. As with any other element of a contract, they should be written in the interest of fairness to all parties, which can be hard to parse. To that end, I've created five scenarios describing the problematic nature of noncompetes, detailing the elements that make the noncompete fair or unfair. Hopefully, they will help you think through the issues as you draft, negotiate, and/or sign your next noncompete.
Scenario 1: The reason matters
You are looking for your first position as an associate veterinarian. Fresh out of veterinary school, your ears are still ringing with warnings to beware the perils that lurk in the fine print of most veterinary employment contracts.
For good reason. Many contracts will make stipulations that would see you tethered to a company for as long as they possibly can. As tight as the veterinary market has been, it only makes sense any company would be loath to see you leave—more so after investing in your development as a profitable veterinarian.
So, when your eyes eventually light upon the paragraphs listed under, "Competition," you quickly identify the meat of the section: If you leave the company for any reason, the contract stipulates, you are prohibited from working within five miles of the practice for a period of five years after the termination of your employment. In a metropolitan area with a dense traffic pattern, those five miles can easily add an extra hour to your daily commute.
What if you hate it after the first month? What if they treat you like a slave or force you to practice in ways you find unethical? What's a smart first-timer to do?
At issue: It's true most noncompetes look the same. At issue is the wording, "for any reason." If you are fired for cause (you practice unethically, you steal, you create a hostile work environment, etc.) then you deserve all your restrictions. If you leave because they behave unethically, create a hostile workplace, do not live up to their contractual obligations, etc.), then you should be free to look elsewhere with no geographic restrictions.
Scenario 2: Too close for comfort
After much soul-searching you realize you have outgrown your first job. You simply don't see eye to eye with the owners and feel their practice style is out of step with yours. It's clearly time to move on, but you are conscious of that noncompete clause you signed four years ago right out of vet school. At the time, it didn't seem like a big deal; it was pretty standard, anyhow, so you signed on the dotted line and now you are concerned. Justifiably, as it turns out.
The practice you have just interviewed well at and hope to make your new home is just 4.8 miles away from your current practice. It's one of only three practices within a 10-mile radius. You tentatively take the job anyway and hope for the best, knowing your realistic alternatives involve commuting at least an hour each way.
Unfortunately, when you tell your current practice you are ready to leave and where you are planning to go, they threaten to sue if you break your noncompete and take the job. Now you're forced to either remain in an uncomfortable position or hire an attorney you cannot afford to free you from bondage and defend your right to work.
My take: If you left of your own accord because you were simply ready to move on, they should have a right to enforce that contract. In this case, however, 0.2 miles seems petty of them given the geography. I mean, will they really lose clients once you leave? If your answer is no, then fighting it is a good idea since you are likely to win. In the future, do the math on the proximity of nearby practices before signing contracts in less populated areas.
Scenario 3: The trouble with technicalities
You've been top earner for nine of the practice's 11-year history and it's the only place you have ever worked. You have helped build the place to where it is today, but you don't feel sufficiently valued for your contributions. You are attached to the place, its team, your clients, and their pets, but the problem remains: It's not yours.
At this point you believe you've proven yourself capable of running your own practice. You make detailed plans, secure a loan, and find the perfect place three and a half miles down the road. It's a growing suburban area and there are plenty of new clients to be found so you do not bat an eye when you sign your new practice's lease and hire a contractor to build it out.
Good thing your boss is super-relaxed and forgot to have you sign that same contract again this year. I mean, its noncompete was super-fuzzy anyway—all about ethics and fairness. Plus, everyone knows noncompetes never hold up in court, right?
Trouble ensues, however, when your boss finds out what you're up to. It didn't help she was the last to learn of your ambitions, or that she got clued in only when news spread that her top tech would be following you.
What matters here: Whether you signed that contract this year is not likely to matter in the eyes of the law. You had signed the same contract multiple times showing you well-understood the point: Leaving to build your own practice within a competitive distance is a "no-no." It's not suddenly fair game (or ethical) because you failed to sign the contract. If she chooses to enforce past contracts, I hope she wins. Plus, stealing staff from the get-go is a really bad look.
Scenario 4: Reminder to document a hostile work environment
Your practice's head tech has always thought you were a slow worker and has never been shy about telling everyone within earshot that you are a slacker. Never mind that your records are always impeccable and you are the last one out of the office every day. To make matters worse, she's recently begun telling other associates that your mental health is to blame for your sluggish work performance. It's obviously out of line. When you bring it up to the practice manager, however, she brushes you off, suggesting you are too sensitive.
You've had enough of this abuse and decide to find a new home. Unfortunately, the practice that fits you best lies within the five-mile radius stipulated by the contract. Technically, it's more than five miles when you enter it into your Waze app, but it's four miles as the crow flies. You take the job anyway, figuring you will fly under anyone's radar given what they clearly think of your performance as a veterinarian.
A month into your new job you get a certified letter informing you of your "breach of contract." It demands you cease your "unfairly competitive practices" or the company will require you pay damages. The upshot: You either leave your new job or find an attorney.
The principle: The most significant issue is your hostile work environment, not the distance. Noncompetes should not hold up if you are being harassed or suffering a hostile workplace. You are effectively leaving through no fault of your own and your next noncompete should include verbiage along those lines. Even if this one does not, you should still fight it. After all, threatening a countersuit for workplace discrimination might just make it all go away…fast.
Scenario 5: Yep, this one's on you
You have been fired. You lied to a client about her pet's condition and the technicians reported your behavior to the manager. What's worse, the client found out when her pet later died and made noises about reporting you to the Board. It was totally blown out of proportion, and you apologized for it anyway. However, the practice was not appeased, and you were terminated.
Finding another job did not take long. It wasn't hard since there was only one other place in the small town you live in. The problem is your former practice is threatening to come after you for defying your noncompete. They hated you anyway so why are they being so vindictive?
Give it up: If you are fired for cause, you do not deserve to complain about your noncompete. They are probably coming after you because you were a liability and do not deserve to compound that liability by attracting even one client away—which it sounds as if you could, given the location. Getting a fresh start elsewhere sounds like the best solution.
Patty Khuly, VMD, MBA, owns a small animal practice in Miami and is available at drpattykhuly.com. Columnists' opinions do not necessarily reflect those of VPN Plus+.
