Non-compete clauses (also known as “covenants not to compete”) are clauses in employment contracts that stipulate how or when an employee can conduct business after leaving an employer. The purpose of non-competes is to protect a business’ “goodwill,” or the value of a business that comes from the synergy between its parts and staff. Non-competes ensure that even if employees leave your organization, you will still be able to maintain your market share and revenue in your region.
Lack of protection leads to conservative hiring practices, which leads to slow business growth. Non-competes provide businesses with the security they need to hire high-level staff—ultimately benefiting the job market. Employee rights are also protected under non-competes, as only specific and limited clauses are enforceable. Non-competes give you a clear and specific set of boundaries that allow you to continue working in confidence.
Whether you are an employee or an employer, it’s vital to understand why a non-compete is important and how favorable agreements are structured.
Focus on Time, Location, & Clients
All non-competes have three dimensions to them: a stipulation on geographic area, on services provided, and how long the covenant lasts. The non-compete has to be specific and limited regarding each one—no employer has the right to limit an individual’s business indefinitely.
For example, Mr. X has left his employer. His non-compete stipulates that he cannot provide a specific procedure developed by his employer in the same state for 3 years following termination. Note that this clause allows him to practice other procedures in the same state immediately, practice that procedure in another state immediately, or practice that procedure in the state 3 years after his contract ends.
The limited nature of the clause protects his employer while leaving him with broad options to earn a living—everyone wins.
The Foundation to Any Non-Compete
The central issue of any restrictive covenant clause is the enforceability of it (and its “consideration,” or value to both parties). If an agreement is too broad or overreaches to the point of nonsense, a court may not enforce it. That’s why it behooves every business—especially hospitals, whose non-competes are subject to unique restrictions—to have an attorney review and strengthen their employment contracts. By limiting their contracts, they ensure stronger protecting over trade secrets and market share.
Unique Concerns for Physician Non-Competes
Recognizing the vital service that doctors provide, Texas law has stipulations pertaining specifically to health care providers. Physician non-compete clauses are required to allow doctors the leeway to continue providing care to patients who request it—especially if the patient is acutely ill or requires specialized medicine. These requirements protect both medical professionals and public health—which is why it’s vital to consult a lawyer before agreeing to a hospital or medical center employment contract.
The geographic limitations in non-competes would be especially relevant for doctors who live in rural areas. Normal non-compete clauses could force a medical specialist out of the area—thus depriving the region of a vital health service. Ensuring that your employment contract is fully compliant with the Texas Business & Commerce Code is vital for your organization’s success—as well as necessary for the public good.
Hendershot, Cannon, Martin & Hisey, P.C. has spent decades ensuring that employment contracts are fair to both employers and employees. Call (713) 909-7323—let us protect your long-term interests today.