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Restrictive Covenant/Non-Compete for Independent Contractor??

Home Practice Management Restrictive Covenant/Non-Compete for Independent Contractor??

  • Avatar tincrin 
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    Hello All,

    We have received a contract that specifies our employment relationship/arrangement with the private practice as that of an independent contractor (explicitly stated in contract). However the contract has a fairly broad restrictive covenant with a non-compete. Is this legal/enforceable?

    Also, this same contract prohibits outside employment/activities such as consulting, speaking arrangements, moonlighting, etc. This also seems questionable as far as enforceability.

    If you could please provide you feedback and insight, we would really appreciate it.

     

    Thanks! 🙂

    #179380 Reply
    jfoxcpacfp jfoxcpacfp 
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    Hello All,

    We have received a contract that specifies our employment relationship/arrangement with the private practice as that of an independent contractor (explicitly stated in contract). However the contract has a fairly broad restrictive covenant with a non-compete. Is this legal/enforceable?

    Also, this same contract prohibits outside employment/activities such as consulting, speaking arrangements, moonlighting, etc. This also seems questionable as far as enforceability.

    If you could please provide you feedback and insight, we would really appreciate it.

     

    Thanks!

    Click to expand…

    Lol, it sounds as if they are trying to have their cake and eat it, too. I don’t see how it could be enforceable, but some docs will be intimidated into whatever the boss-in-name-only asks in order to keep the terms of whatever sweet deal is offered. Good time to see an experienced contract atty. Not even sure that, if you sign in blood w/your firstborn as a guarantee, it w/b enforceable in court. But, of course, you never (almost) never want to go that far, if at all possible. I have to wonder WTH kind of atty the practice (and even CPA) is using.

    Johanna Fox Turner, CPA, CFP, Fox Wealth Mgmt & Fox CPAs ~ 270-247-0555
    https://fox-cpas.com/for-doctors-only/

    #179396 Reply
    Liked by Zaphod
    Avatar spiritrider 
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    While non-compete clauses in employment contracts may have limited enforcement in certain states, even there I would never assume it can’t be fully enforced without professional legal advice.

    I would double down on that advice when it comes to the contractual relationship between a client and an independent contractor. Generally, you have very little legal protections that an employee might have.

    Restrictions on outside employment are generally common and fully enforceable against employees.

    However, such restrictions are 100% contrary to and jeopardizes the IC classification. You might point out to them to the 4th bullet on IRS Fact Sheet FS-2017-09, July 20, 2017 Understanding Employee vs. Contractor Designation

    • Services available to the market. Independent contractors are generally free to seek out business opportunities.

    I consider all initial contracts as negotiating positions. Like all negotiations you can push as hard as you want, understanding that the other party can always just walk away.

    #179399 Reply
    Liked by pulmdoc, Zaphod
    Avatar tincrin 
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    Thank you for your input!

    spiritrider, are you suggesting that a restrictive covenant could be enforced against an IC as they have little legal protections?

    If anyone has any direct experience with these issues, that would be great to hear!

    Thanks!

    #179545 Reply
    Zaphod Zaphod 
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    No its not really enforceable, but could cause you some headache/heartburn so its best taken care of up front. I have the same kind of contract, except its triple stupid since Im in California where its a priori illegal anyway. They just love to have the power.

    If you get that removed dont allow them to say, well I already buckled on the covenant so you have to work with me here.

    #179550 Reply
    Avatar bean1970 
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    state dependent. In Florida they are completely enforceable, employee or independent contractor.

    Independent contractors are subject to covenants not to compete per Florida’s Non-Competition Covenant Statute, § 542.335

    #179556 Reply
    Liked by Zaphod, jfoxcpacfp
    Zaphod Zaphod 
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    state dependent. In Florida they are completely enforceable, employee or independent contractor.

    Independent contractors are subject to covenants not to compete per Florida’s Non-Competition Covenant Statute, § 542.335

    Click to expand…

    Very interesting. Always make sure to check your state laws and general treatments!

    #179618 Reply
    Avatar lmbebo 
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    I would be highly dubious about signing a contract like that.  A friend was trying to sign up to do locums NICU work (military physician).  The company doing the hiring tried to get her to sign a non-compete of 3 years and 50 miles from any site they covered (non competes tend to be enforced locally).  She ended up walking away from the locums opportunity because of it.  Especially for doing 1-3 shift a month at most.

    #179654 Reply
    MPMD MPMD 
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    Thank you for your input!

    spiritrider, are you suggesting that a restrictive covenant could be enforced against an IC as they have little legal protections?

    If anyone has any direct experience with these issues, that would be great to hear!

    Thanks!

    Click to expand…

    I think he’s saying the exact opposite.

    As I understand it the IRS “likes” for workers to be employees and tends to scrutinize IC relationships more carefully.

    I think if an employer were trying to impose a noncompete on an IC the contractor would have significant legal backing to say “if you want to control my work outside your institution, hire me as an employee, since you have chosen not to do that, go pound sand.”

    #179662 Reply
    Liked by Kamban, Zaphod
    Avatar spiritrider 
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    Actually, I’m saying both.

    Depending on the state there may be less protections for ICs than for employees. The OP should not rely on the assumption the restrictive covenant is not enforceable without specific local legal review.

    And as you pointed out, such restrictive covenants are a characteristic of employee classification and contrary to IC classification.

    #179670 Reply
    Liked by MPMD
    Avatar SLC OB 
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    We live in California, where as @zaphod said, they are not enforceable however we also live near the state line with Nevada, where they are often used and enforced. My husband worked in Nevada for almost ten years, they got hired at my hospital which was across state lines, which made us feel better, and was a whole 2 miles out of his range for the non-compete.

    Definitely have a lawyer in your state look at it.

    We have clauses in our contracts about outside work. Often times, if you give them the reason you want to be able to work elsewhere, then they will ton that part down or say except for “X,Y,Z”  I think the reason is that they want a doc to focus on their program development and establishing a practice, which is hard if you are focused on your Locums/Moonlighting gig.

    Good luck.

    #180344 Reply

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