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Non-Compete Clauses

Non-Compete, or Non- Competition, clauses are common in employment contracts.  This article will raise 2 issues in its hypothetical: (1) the enforceability of non-compete clauses in California, and (2) that an employee obtain legal advice before signing any employment agreement.

You are excited…. You have finished your residency and fellowship. You and your partner have done a comprehensive search of the best place to live and practice, and you have scored a job at the best hospital on “pill hill.” Not only that, you found the perfect house, and won the skirmish for the purchase at only $125,000 over the asking price. Life is good.

You start your new job, and start to notice little things that weren’t apparent during your interview. Anesthesiologists are unhappy, and are verbalizing their displeasure. Staff morale is low.  Your call schedule is much heavier than expected, and you are running from hospital to hospital. You were promised an average day would be done by 1600, but it’s in actuality, that new physicians are routinely asked to stay later.

When your first check arrives, the income is not as was promised. Senior doctors are paid better, doing easier cases and going home earlier. You realize that doctors have been leaving the practice at a rapid rate, and you want to leave too.

You make an appointment with the Group President, and he tells you that you have signed a 5-year contract that contains a “Non-Compete Clause.” If you leave, you cannot take a job within 50 miles. He further says that everyone that has challenged the non-compete has been unsuccessful. You go home dejected.

Your spouse greets you at the door, and you can barely hide your impending depression. A colleague suggested you contact CMA or CSA to find out about non-compete clauses. You search the site, and find a reference to the pertinent section in the Business And Professions Code – Bpc, Division 7. General Business Regulations, Part 2. PreservationAnd Regulation Of Competition, Chapter 1. Contracts in Restraint of Trade, 16600. (Added by Stats. 1941, Ch. 526.)1

“Except as provided in this chapter, every contract by which anyone is restrained from engaging in a lawful profession, trade, or business of any kind is to that extent void.”

Eureka! There is hope! Your sister-in-law is an attorney, so you call her for her thoughts. Although she is a Personal Injury Specialist, she confirms your reading of the law. However, this isn’t her professional expertise.  She explains that even though a clause is unenforceable, it can still be included in a contract. Naive employees might obey illegal sections of the contract.Litigation can be brought to make finding a local alternative job difficult. It is legal to prevent the theft or taking of the companies secrets but is it actionable to want to leave and practice elsewhere in the community?

You do further research, and find that the law has been appealed to the United States Court Of AppealsFor The Ninth Circuit, No. 16-17354, Donald Golden v. California Emergency Physicians Medical Group2, Filed July 24, 2018.The Court concluded Section 16600 disallowed noncompetition agreements and extended that limitation to “any restraint of a substantial character”.

Your brother-in-law advised you that you should consult an attorney. This is wise advice.However, you can be thankful that you are in California, where the law intends that you should not be constrained.

1. Contracts in Restraint of Trade

2. Donald Golden v. California Emergency Physicians Medical Group

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