The following Statement on Restrictive Covenants was developed by the American College of Surgeons (ACS) Division of Advocacy and Health Policy. The ACS Board of Regents approved the statement at its June 2021 meeting in Chicago, IL.
Surgeons may be asked to enter into contractual terms for employment that include a “restrictive covenant” or “covenant not to compete,” enforceable upon their voluntary separation or involuntary dismissal from employment, with or without cause.
Members of the ACS also are urged to have all employment contracts reviewed by an attorney who is familiar with local laws and precedents in the state where they intend to be employed prior to signing any contract.
Whenever possible, members are urged to avoid restrictive covenants that interfere with the uninterrupted delivery of qualified surgical care, limit patient access to care, or limit patient choice. The impact of such agreements is detrimental to the physician-patient relationship.
Any restrictive covenant provisions included in a physician employment agreement should be explicit and detailed. In discussions with their attorneys, members of the College should specifically seek advice relative to the following:
- The defined geographic area covered by the restriction
- The duration of the restrictive covenant
- Whether the duration extends beyond the time necessary for the employer to recoup any monetary consideration provided as a signing bonus, moving expense, and/or other financial benefits received during the recruitment process
- Whether the restrictive covenant clause renews with the automatic renewal of other employment terms in subsequent contracts
- What the contract specifies is received in exchange for accepting the terms of the restrictive covenant, and whether courts in that state consider what is received adequate to enforce those terms
Although the College recognizes the perceived necessity of restrictive covenants from the perspective of employers and the intent behind their inclusion in physician employment agreements, members of the College should carefully review the restrictive covenants contained in proposed employment contracts with expert legal counsel and negotiate mutually agreeable terms with prospective employers.
An entirely cogent position paper, insofar as it goes.
What should be explicitly condemned is the widespread use of restrictive covenants by large health systems. These systems use their market power to artificially depress the salaries of employed physicians. Their outsized resources to enforce restrictive covenants make them unassailable, even in states where courts might invalidate these agreements. In many cases physicians who leave one health system must move their families to another community.
When a health system employs thousands of physicians it will not “negotiate mutually agreeable terms” with individuals, unless that physician is an unusual “strategic” hire.
The college should use its influence to affect change in the employment practices of universities and health systems. As it happens, many College leaders hold leadership positions in these organizations.