Doctors, especially those who specialize in a particular field of medicine, are in a competitive business. As such, an increasing number of medical practices are attempting to limit the competition by requiring physicians in the practice to enter into employment agreements which include restrictive covenants. As one recent case demonstrates, such covenants may be tricky to enforce.
In the case of Fame v. Allergy & Immunology, PLC, a Virginia Circuit Court found that a non-competition covenant was overbroad and unenforceable. Plaintiff, Dr. Thomas Fame (a board certified allergist and immunologist), brought a declaratory judgment action against his former employer, Allergy & Immunology, PLC (“A&I”) seeking an injunction against enforcement of the restrictive covenant. In essence, the restrictive covenant prohibited Dr. Fame from competing with A&I in a specified (and rather large) geographical area in Southwestern Virginia for a period of two years following the termination of his employment with A&I. While the Court did not have a problem with the two year restriction, the wording of the covenant itself was problematic as it was subject to two interpretations. One interpretation prohibited Dr. Fame from treating any patients who were from the geographical areas, regardless of where his practice was actually located; and the second interpretation prohibited Dr. Fame from treating patients while he was physically in the prohibited areas, regardless of where the patients resided. The Court found that the first interpretation was overly broad in that Dr. Fame’s practice could be located well outside of the restricted area (even in another state), but if a patient resided in the restricted area, Dr. Fame was prohibited from providing treatment. Such a restriction would not be narrowly tailored to protect the legitimate business interests of A&I. Therefore, the Court concluded that, under the law, when a restrictive covenant is subject to multiple reasonable interpretations and at least one such interpretation is overly broad, the restriction is unenforceable.
It is interesting to note that in addition to the ambiguity in the restrictive covenant, the Court found that the restrictive covenant was unduly burdensome upon Dr. Fame’s ability to earn a livelihood. Due to the expansive geographical area covered by the restrictive covenant, Dr. Fame would have been forced to either find a new career in his local area, or move away from his home and establish a practice in another area. The Court found such a choice to be unduly harsh and oppressive. This finding may provide a cautionary note to medical practices and their counsel not to be overly aggressive in including broad geographical restrictions in non-competition agreements which would essentially force a doctor to relocate in order to continue practicing medicine. Such restrictions may be viewed as not only unduly harsh and oppressive to the individual physician, but may also be viewed as unreasonable with respect to the public’s interest of having the physician’s services available in the community.
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