A physician’s employment contract—especially that first contract after residency or fellowship training—can set the tone for the career yet to come, so it’s important for employed physicians to ensure they understand what they are signing and to negotiate fair terms.
Salary, contract length and termination clauses are all important elements to review. But physicians also need to be on the lookout for noncompete clauses—often called restrictive covenants or a “covenant not to compete”—and they need to be scrutinized if they exist.
The first question to ask, said Florida-based lawyer Richard H. Levenstein, is: What are the restrictions?
Those might include the physical area a physician would be restricted from practicing in if they left the job. Is it a 25-mile radius? A 50-mile radius? And that includes understanding the amount of time the physician would be restricted from working within that restricted radius—one year? Another time period?
“Assuming there is a covenant, you would first look at those terms and see how that is going to impact you as a physician if that covenant is ever enforced,” Levenstein said in an interview with the AMA. “Is your practice one you could move 25 miles out of town, or 10 miles, or whatever it is for a year or two? Are you a young physician where a covenant-not-to-compete would cause you to move to another location after you bought a house or you’ve had children who are in school? How disruptive is that going to be in your life?”
Physicians should become familiar with the state laws that govern their geographic area and the time periods that noncompete clauses can restrict, said Levenstein, a shareholder at the law firm of Nason, Yeager, Gerson, Harris and Fumero P.A. in Palm Beach Gardens, Florida, and leader of the health care practice group at Nason Yeager.
The legal landscape for noncompete clauses has evolved over the last few years. Arkansas and Wyoming appeared to join Massachusetts and New Hampshire recently in banning all restrictive covenants for physicians. But the legal status of noncompete agreements in most states remains far more complex.
With such statewide variance, and so many recent changes, physicians need help. Levenstein strongly advises that physicians have a lawyer review a contract before they sign it.
“There is very little a lawyer can do after that contract is signed,” he said.
The AMA also recommends that all physicians, before signing any employment contract, retain the services of an attorney who specializes in health care employment law.
And Resolve offers automated risk assessment of contracts, a process that will flag areas of concern and identify the level of risk with each negotiating point. Then, physicians can get the help of an experienced attorney to negotiate the contract.
AMA members get a 20% discount on all Resolve services, which include:
- Custom contract review for any type of employment contract.
- Access to experienced attorneys who can negotiate on your behalf.
- Real-time, comprehensive compensation data and benchmarks to help you understand your worth.
- An instant contract-review option, powered by Resolve’s attorney-trained AI model.
- Free tools such as a contract scorecard to give a quick overview of where your contract stands.
Trying to limit a noncompete
It’s unlikely that a physician can get a noncompete clause totally eliminated from a contract, but Levenstein said it is important to do everything possible to limit what triggers a noncompete clause’s applicability.
Some ways to go about that are to have the covenant only apply:
- If the physician leaves employment without cause, meaning they just decide one day that they don’t want to work there anymore.
- If the employer fires the physician for cause, meaning the employer has a reason to terminate the physician’s employment.
“I’d try my best to have those covenants only apply in those two circumstances, which eliminates the employer’s ability to terminate without cause and then enforce the covenant. That is a terrible result for a physician,” said Levenstein, a lecturer at Tulane University School of Medicine and an adjunct professor of law at the university’s law school. “As a lawyer, it seems to me that the employer has an argument to make that if the employee leaves without cause or if the employer terminates for cause, the enforcement of the covenant would be a fair result. But if the employee terminates for cause or if the employer terminates without cause, there shouldn’t be a covenant.”
Some contracts also have a buyout clause where an employed physician can pay a certain amount of money—generally speaking, anywhere from a half a year to a whole year of the physician’s compensation package—to eliminate the covenant. But the only time that happens is when the new employer is willing to do that, as most physicians do not have enough money in a lump sum to buy their way out, or the ability to secure a loan to do so.
Get expert help from the AMA to understand physician employment contracts.
Changing noncompete landscape
A viewpoint article published in the Journal of the American College of Cardiology explores changes that are taking place at the state level, including a map of states that ban noncompete clauses entirely or restrict them by statute or common law. While some states bar noncompete clauses for physicians, many allow them with some restrictions, as provided by statute or under common law.
Among other resources, Resolve offers state-by-state information relevant to physicians on laws covering noncompete agreements, telemedicine and more.
The AMA House of Delegates adopted policy in 2024 opposing “all restrictive covenants between employers and physician employees.”
“Owners of private practices often invest heavily when hiring and training physicians, and those owners may believe that they need to use reasonable noncompete agreements to compete with large hospital systems or other dominant institutional employers,” AMA Trustee Ilse Levin, DO, MPH & TM, said upon passage of the AMA’s new policy. “Preserving and fostering independent physicians and other physician-led organizations is crucial to a healthy nation.”
