I'M HEARING from some corners of the nursing universe that for-profit healthcare corporations are requiring professional service delivery employees, including RNs, to sign noncompete agreements as part of their overall employment contract. For example, “Jeff” is an RN who wants to accept a travel assignment at a hospital that he's been considering for permanent employment. His employer, the travel agency, asks him to sign a noncompete agreement that would prevent him from taking a position with this hospital for 6 months after his travel assignment ends. Is this agreement enforceable?
Noncompete agreements are intended to prevent employees like Jeff from resigning to work for a competing organization. If you're asked to execute such an agreement, what should you look for and what should you know? Good question. This article will explore the basics of this employment law specialty.
The noncompete clause or agreement in an employment contract is a restrictive covenant (agreement) banning the employee from engaging alternative current or future employment that directly competes with his or her current employer's business interests.1 General requirements of a noncompete include the following:2
- identity of the parties (employer and employee)
- recitations of the type of services to be performed by the employee and those services that are restricted
- consideration in exchange for the restriction (usually money but it can simply be the offer of employment itself)
- termination of the restriction versus termination of employment. This clause means the restrictions on employment survive if you're voluntarily or involuntarily terminated from work.
- the scope of the restrictions with respect to job duties, geography (distance from the site of job), and time (months/years). Most courts expect these provisions to be equitable (reasonable) or they won't enforce the agreement against you.
- violation/breach remedies. This section concerns what the employer can do to you if you breach (break) the contract by engaging alternate employment that the contract restricts. Typically, the prior employer asks the court to block you from working for a competitor (called a legal injunction). The prior employer may also seek financial damages from you and/or the competing business for money lost in the process, as well as attorneys' fees and costs of litigation.
- choice of law/choice of forum. This clause determines ahead of time what state law will apply to the contract and in what court the employer can sue you if you breach the agreement.
- nonsolicitation clause. These special terms may also be included in your employment contract as a separate provision or as part of the noncompete agreement. Nonsolicitation agreements prohibit you from seeking out business with the employer's current customers in the event that you leave and go to another competing business. In contrast with the noncompete clause, which restricts your employment, the nonsolicitation clause restricts you from taking the employer's business and customers with you when you leave.
Can these agreements be enforced?
Noncompete agreements are usually very narrowly construed by courts. This means that they're generally read to have the least restrictive effect possible. That said, these agreements can be enforced and employers will try to enforce them.
For a noncompete agreement to be enforceable, the restrictions must be reasonable in scope, geography, and time. If you're a nurse working for a home-care rehabilitation provider in Delaware, for example, a reasonable noncompete agreement might prohibit you from providing direct home-care nursing care for another Delaware home-care provider for a period of 6 months to 1 year. A court would probably find these restrictions reasonable in time (1 year or less), scope (direct nursing home-care services), and geography (within the state of Delaware, within 60 miles of the service area).3
On the flip side, under the same circumstances a court wouldn't find reasonable a provision prohibiting you from working as a nurse in a mid-Atlantic state for 3 years. These restrictions are unreasonable in scope (all professional nursing services), time (longer than 1 year), and geography (New York to North Carolina). Such an agreement would prevent you from working as a nurse at all, and a court isn't likely not enforce it.
To shed more light on this area of law, I refer readers to a hearing transcript from a court in Delaware that often considers the legality of noncompete clauses. I've tried several cases in this court and would like to give you a flavor of how courts think in the noncompete area.4
Here's the takeaway
So, this information seems complex and it certainly can be, but what's the takeaway? The concept I'm trying to pass on is that noncompete agreements are out there in healthcare. If, like Jeff, you're asked to sign one, you need to read and review it carefully, check your local law, and seek out an employment law attorney to review it. My advice is that it's better to spend a little money on the front end in prevention than to spend a ton of money on the back end in remediation.
Happy spring to all! Stay safe and until next time, keep it legal!
1. Holt S. What should be in your noncompete agreement? Delaware Non-compete Blog. Young Conaway Stargatt & Taylor, LLPFebruary 9, 2016. http://www.delawarenoncompetelawblog.com
2. FindLaw.com. Non-competition agreements: overview. 2016. http://employment.findlaw.com/hiring-process/non-competition-agreements-overview.html.
3. LawServer.com. Non-competition agreements in Delaware. http://www.lawserver.com
4. Court of Chancery of the State of Delaware. Bridgeport Tank Trucks, LLC v Carl E. Smith. 2013. http://www.delawareemploymentlawblog.com