It is a balmy Friday morning in June. You feel a bit giddy because your assistant scheduled the last procedure for 2 p.m. Your kids left for summer camp last week, and you have a great early dinner with friends planned. It’s rained a little during the week, but the weekend forecast is glorious. Nothing is going to ruin your warm, relaxing spring weekend. Nothing, until your junior partner — only years out of his fellowship — knocks on your office door and gives notice. Can he do that? There goes the weekend.
After meeting with your other partners, you learn that the departing partner has joined a competing practice and plans to maintain privileges at the same hospital in order to treat patients locally. Is your practice in jeopardy? What can you do?
A review of the partnership agreement reveals non-compete and non-solicit restrictions, but you have always heard that these are not worth the paper they are written on. Luckily, in New York, that is not the case.
Properly crafted restrictive covenants are enforceable so long as they are reasonable as to time and geographic scope and necessary to protect your legitimate interests.1 You also thought that it was more difficult to enforce physician restrictive covenants — something about patient choice. However, courts in New York have held that “[c]ovenants restricting a professional, and in particular a physician, from competing with a former employer or associate are common and generally acceptable.”2
You immediately contact your employment attorney and instruct her to take an aggressive approach. On Monday morning, your attorney sends a cease-and-desist letter reminding your former partner, in no uncertain terms, of his obligations under the partnership agreement. This may or may not result in a response from his attorney. Under the best of circumstances, you will work out a satisfactory arrangement. If that fails, your attorney can prepare motion papers, institute an action and march into court seeking a temporary restraining order. If there are sufficient grounds, the court will grant a temporary restraining order, pending an opportunity for your former partner (through his lawyer) to argue against your ultimate request for a preliminary injunction, which would restrain his conduct through the end of the lawsuit. It is not unusual for the parties to reach some sort of settlement prior to these matters going to trial. However, you will not have had the opportunity to take these steps if you did not have the agreement in the first instance and if it did not contain reasonable restrictions. Thus, it is never too late to review and update restrictions. Overreaching restrictions run the risk of being unenforceable.
Better weather is around the corner. Do not ruin your weekends. Do not put your practice at risk, and do not turn a blind eye to the terms in your agreements. If you are faced with a similar situation, we recommend having counsel review your existing employment and partnership agreements (and identify these issues in new agreements) to ensure that you have the tools necessary to protect your practice.
Adam G. Guttell, JD, is a Partner in Martin Clearwater & Bell LLP’s Employment & Labor Practice Group. Guttell has extensive experience advising employers of all sizes in diverse industries including health care, finance, manufacturing, transportation and hospitality. As a member of MCB’s Employment & Labor Practice Group, he represents clients in employment-related issues ranging from discrimination and harassment to violations of all state and federal fair employment law. For more information, contact email@example.com.
- Reed, Roberts Assoc. v. Strauman, 40 N.Y.2d 303, 307 (1976)
- Gelder Medical Group v. Webber, 41 N.Y.2d 680, 683, 363 N.E.2d 573, 577, 394 N.Y.S.2d 867, 870 (1977); see also North Shore Hematology/Oncology et al. v. Zervos, 278 A.D.2d 210, 717 N.Y.S.2d 250 (2d Dept. 2000)