Non-compete Agreements in Private Practice with Guest Lisa Fraley

Imagine you join a group practice, as an employee or contractor, and you are asked to sign a non-compete agreement. This means if you leave the practice you cannot create a business that "competes" within a certain mile radius or serving the same clients. These non-competes all vary, but more and more we are hearing therapists being asked to sign them.

You might feel confused, scared, or just too overwhelmed to care because you need the work right now.

I invited Lisa Fraley, is a Legal Coach® and Attorney, to answer some basic questions about non-compete agreements in the mental health world. Here is what she had to say. 

Let's get to the basics first. What is a non-compete clause?

A non-compete clause is language that is designed to prevent someone who is entering into a working relationship with an employer from competing directly against the employer or entering into a similar job position that is in competition with the business for a certain period of time (such as "for 2 years") and/or in within a certain geographic distance (such as "within 50 miles") after the person stops working for the employer. It is also called a covenant not to compete. It's designed to prevent someone from working for a company, learning a ton and then going to work for someone else or opening their own business and competing directly against the employer. 

When are they typically used in business?

Non-compete clauses are often used in contracts by employers when hiring employees to restrict them from going to work for a competitor after they leave the employment of the employer. They are also sometimes used by independent contractors when contracting with someone for services. They are designed to protect the employer, and typically, are not in the employee's best interest. 

Energetically, as a business owner what is happening when I want to use a non-compete clause?

As a business owner, it's natural that you might be concerned with hiring someone and training them to learn the expertise and inner workings of your business and fearing that they will leave your employment and run off, take your ideas and open up a business that directly competes with yours - when you just taught them everything they know.  That's totally understandable. 

At the same time, energetically, using a non-compete comes from a scarcity mindset. If you believe that the Universe is abundant, there is enough business for everyone. Even if someone takes and uses what they learned from your business and opened a competing business, they can never do it the same way you did because you are different people with different ideas and you are always changing and growing. It's hard to be open and trust that someone won't take your ideas - and you do want to use a contract that contains confidentiality, non-disclosure and intellectual property clauses - but limiting their capacity to work or contract with someone else after working with you is very restrictive to them in a practical way and to you in an energetic way. 

What should I consider before signing a non-compete clause?

Be sure to have an attorney review the contract, including the non-compete clause, and explain it to you so you can be crystal clear as to what it says BEFORE you sign it. Non-compete clauses can vary so make sure you are comfortable with it and understand the ramifications for your business/employment potential if you are being asked to sign one.

Is the response as a contractor different than as an employee to a non-compete clause?

If you are a contractor, enter into contracts that contain non-compete clauses with extreme caution. Why? Because if you are a contractor, by legal definition, you have more control and direction over your work and typically want the flexibility to work with more than one client at a time. if you are restricted to a non-compete clause, make sure you are aware how your work is being restricted and for how long after your contract terminates or expires. As a contractor, you may want to protect your freedom to contract with others in the future by not agreeing to non-compete clauses.

Any advice for someone who has signed one and is now realizing it was a big mistake?

Unfortunately, employees and contractors enter into non-compete clauses or agreements all the time without realizing how they have limited their options. In some states, like California, non-compete clauses are not enforceable by law, but in other states, such as Texas, they still are. Each state is different. Be sure to talk with an attorney to find out what your state's law allows regarding non-compete clauses.

Kelly here: I want to also add something about what happens to the clients. Often people are told they can't take their clients with them. The client has to stay at the clinic. I've been told that before as well. Always consult your board when you are told this. Clients have free will. Clients have the right to choose their provider. So in addition to a non-compete agreement, please get this clarified before signing on for employment or contract work. 

If you own a business and are hiring employees and contractors, think about how your business practices create the culture. You want a culture where people want to stay! Fear is not the way to go if that is what you want. First, step in hiring people with longevity is to hire people who do not want to be independent, on their own, business owners. Who you hire matters more than some of these clauses and agreements you might be wanting to use.

There may be times where a non-compete is warranted. I want to encourage you to make solid, educated decisions with integrity in your practice. Get the support you need. Always get legal counsel. Consult your boards or associations. If you are employer - encourage your employees to do so. It's a good thing that they want integrity and to be sure they understand what they are getting into. It will ensure a better fit in the long run.

Thanks to Lisa Fraley for her contribution to this article. 

lisa fraley

Lisa Fraley, JD, CHHC, AADP, is a Legal Coach® and Attorney and the creator of &"Get Legally Covered So You Can Go Bare", the legal course for coaches and entrepreneurs, and “7 Days to Get Legally Enlightened”, a mini legal-e- course, and the co-creator of “Damsel Goes Bare” with Gena Shingle Jaffe. Lisa calls herself a Holistic Lawyer® because she’s combined her years as Health Care Attorney in a large corporate law firm with her coaching skills as a certified Health Coach and Life Coach. She has worked one-on- one with hundreds of entrepreneurs since becoming a Legal Coach® in 2012 to help them protect themselves, their businesses and their brands through creating contracts, terms and conditions, corporate entities and trademarks with lots of Legal Love™ - so they don't have to worry, stress, or fear that they’re legally naked or exposed. Check her out here!