Non-Compete Clauses Are Coming to Town- Better Check Your List Twice!

When one graduates from veterinary school, there are many life decisions to be made- how to set up veterinary school loan repayments, how to select the best practice for employment and how to enter into important contracts with one’s new employer. Each of these three post-graduate challenges can affect a new veterinarian’s initial success in the veterinary field. While the first two elements depend upon an individual’s personal preferences, the value of non-compete clauses relies upon well-defined industry concepts.

Veterinary Non-Compete Clauses 101

There is nothing new about non-compete clauses. Having served as an efficient means of protecting both a veterinary practice owner and a veterinarian employee for years, non-compete clauses have value if they are drafted and implemented as fair and reasonable agreements. However, the employment dynamic between veterinarian owners and associates is susceptible to sepsis once an associate desires to leave a practice and put out his/her own shingle.

What are Non-Compete Clauses?

A covenant not to compete prohibits a terminated associate from operating a competing practice within a geographic area for a set period of time. (Note: they are distinguished from non-solicitation provisions that prohibit an associate from soliciting specific existing clients or co-workers regardless of where the former associate is located.)

Under most state laws, employment non-competition agreements are enforceable only if the geographic location from which the employee is prohibited from practicing and the length of time that the non-compete applies is reasonable. The “reasonableness” is subject to review; most state courts focus on how much time a practice needs to establish a relationship with clients.

Competing “Non-Compete” Perspectives

The Veterinarian Associate–
If you are a new veterinarian, you want to ensure proper protections are in place before entering an employment contract. The restriction on your right to compete should be fair and should be no broader than necessary in length of time and geographic scope. Before you sign away your freedom, make sure that your contract provides favorable compensation and benefits. If the non-compete clause seems unreasonable or unfair, it probably is. In this case, you should strongly consider seeking employment in a different veterinary clinic.

Remember, it is important to negotiate a veterinary non-competition agreement before you start your employment, not when you are ready to end it. Otherwise, you may find yourself stuck and unable to successfully negotiate your next career move.

The Veterinarian Employer–
Non-compete clauses are designed to be fair and protect an employer’s business interest. An employer invests time, training, money, client relationships, etc. with his/her employees and the courts will allow the employer to protect those interests.

Preventive Medicine

Here are some tips to consider when drafting/signing your contract:

• Be narrow. Define veterinary non-compete clauses narrowly. Be specific about pertinent proprietary information (equipment, technology, sales prospects, etc.)
• Be exact. Structure the agreement such that if one part of the clause may be found too broad, the remainder of it is still enforceable.
• Be reasonable. Make sure the time and geographic restrictions are not too long or too broad. An enforceable and properly drafted associate agreement will avail you of several remedies should a former employee breach the covenant.

Remedies for Breach of Contract

Should an employer veterinarian find him/herself at the short end of the non-compete clause stick (i.e., a former associate has just set up practice down the street and was or is actively soliciting clients), there are several remedies available. (The success of these remedies assumes, of course, that the clause was initially well drafted.)

Injunction: This remedy will immediately stop the former associate from soliciting your clients/employees and from competing with your practice.

Monetary Damages: Understanding how much you may be able to recover depends on how well you understand whether your employment agreement contained a liquid damage provision. In general, if you are able to prove that your former associate solicited your clients prior to leaving your veterinary hospital, you may be entitled to receive compensation that you paid that associate during the time s/he served under your employment.

Attorneys’ Fees: You may also be entitled to receive the cost of attorneys’ fees for the ensuing legal actions.

Preventive Care is Always the Best Care

Incorporating a well-crafted non-compete clause into an employee contract is advantageous for both the veterinary hospital employee and employer. Ensuring that it is reasonable in its terms will afford both parties comfort knowing they are protected should the employment relationship one day come to an end.