How Associates Can Address Their Restrictive Covenants For Their Long-Term Plans
Restrictive covenants, such as noncompete or nonsolicitation provisions, may affect the associate’s long-term plans because they cannot work in the hiring dentist’s area, which could be their hometown or certain communities, “for a certain number of years” (Guthrie 2014; Snyder and Jaffe 2013; Wolff and Snyder 2016). Associates may have to resort to other places, moving his or her family with them (Wolff and Snyder 2016). If associates violate these provisions in any way, they have to pay for any damages due to the liquidated damages provision and “for each patient directly solicited as well as payment of a significant fee for the loss of staff members…” (Fitzpatrick; Prescott 2017; Snyder and Jaffe 2013). However, associates can deal with these restrictive covenants in a variety of ways.
Associates must consider how to address these covenants for their long-term plans. William Prescott, “a practice transition and tax attorney,” recommends that associates should not sign contracts with provisions too constraining on their future practice location (Rabinowitz 2017). He also states, “associates should not agree to outrageous liquidated damage provisions” (Prescott 2017). Instead, associates can “buy out [their] restrictive covenant” in the employer’s liquidated damages clause in order to practice within their employer’s area later on (Prescott 2017; Schaub and Snyder 2015). Buying out the covenant may also include “[purchasing] the list of those patients he or she has been treating” (Snyder and Jaffe 2013). In addition, this option can allow associates to “request a loan for a practice start-up” and “additional funds to purchase his/her patient list” (Snyder and Jaffe 2013). Additionally, when the associate is hired, they can be working during a period lasting 90 or 180 days, in which, if they quit the practice within that timeframe, the noncompete provision would not take effect, allowing them to practice in the same area (Snyder and Jaffe 2013; Wolff and Snyder 2016). They may still have to follow the nonsolicitation provision, which stops them from taking the employer’s “patients, referral sources, and staff…” (Prescott 2017). For those who accept the covenants, Prescott says, “Those patients directly referred to the practice by the associate, as well as the associate’s friends and family (collectively the ‘associate’s patients’), should be excluded from the restrictive covenant provisions” (2017). Consequently, when the associate leaves the practice, he or she can take their patients’ charts and records with them (Prescott 2017). Also, after agreeing to the noncompete provision, associates may receive perks, “such as a promotion or salary increase,” via independent consideration in their contract (Banasek 2007).
While restrictive covenants help protect the employer’s business, they can greatly affect the associates’ plans for their own clinics in the future. Associates should be aware of alternatives and caveats to these covenants in order to easily find practice locations and possibly retain patients they treated in their employer’s practice later on in their career. With a preferred location that could be in their former employer’s area, they could earn profit as owners of their practice.