Volume 9 Issue 2 March 2016

When Restrictive Covenants Will Not Apply
See if they will agree to circumstances upon which you will be released from the covenant. What is commonly called a “honeymoon” period is an agreement that if the relationship ends within a certain period of time of its commencement, then both parties can move on without restriction. This “probationary” period depends on the employer’s willingness to allow you to move across the street even if you have only been there for a month – some are too protective to allow an exception. Honeymoons can range from 30 days to 1 year, so check. I always ask that the covenant also not apply if you terminate for breach by the employer after they have a 30 day cure period (this typically just means you were not paid). Also, though it is not always agreeable since if you are there for a long time you are a threat regardless as to why you left, I would still try to see if they will release you from the covenant if you are terminated “without cause” or “for convenience”. There are other possible exceptions depending on the circumstances, including those relating to sudden salary changes or partnership opportunity loss.

Length of Time
Typical post-termination covenants range from 1 to 3 years for employees. Partner covenants can be up to 5 years. Practically you have to get a new job right away anyway so a 12 month covenant can arguably be equally protective of an employer, but most employers will not agree to less than 2 years. Ask for as little time as possible of course. They might agree to a shorter restrictive covenant period so long as you cannot solicit their employees or referral sources for a longer period of time. As mentioned above with respect to part-time employment, perhaps the length of the covenant can start low and increase with the length of time of employment.

Carveouts
Possible scope of covenant or location carve-outs may be available. They might be okay with you working for a hospital within the four corners of its outpatient or inpatient facility (but not at an outside office affiliated with the hospital). Maybe they will allow you to maintain staff privileges (and perform procedures) at a local surgery center or hospital, so long as you work in an office outside of the restrictive area. Specialized areas of practice can also be used as carveouts, such as allowing you to exclude pain management from the restriction definition if it is not the core concern of the employer.

In the end, covenants need to be evaluated on a case-by-case basis in light of your and the employer’s particular needs. Though we always try to negotiate them, they may very well be “fair” to both sides from the very start.

Article contributed by Ron Lebow, More information on this subject will follow in the next newsletter

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