Should You Require A Non-Compete?
The veterinary industry is rapidly evolving, rather than being reactive, successful practices are embracing these changes and taking a progressive approach when it comes to recruiting new DVMs to the team. These practices are evaluating whether traditional paradigms of employment are still appropriate. One of the most significant questions practice owners are asking is whether non-competition agreements are still beneficial and necessary.
Requiring a non-compete is a lot like signing a pre-nuptial agreement and can inhibit the development of trust and comradery in a new doctor. In fact, these agreements can breed mistrust and resentment. In today’s competitive labor landscape, where there are 19 available positions for every DVM looking, not including a non-competition agreement could be a significant factor in a doctor deciding to accept a position with your practice over a completing offer. Small business owners have felt the crunch of not being able to compete with corporate groups offering $50k+ signing bonuses, to some, this might level the playing field.
In theory, a non-competition agreement, which is part of the restrictive covenant clauses, prevents a former employee from working for a specific competitor or within a certain geographical region. Not only is a non-competition agreement difficult to enforce in court, but those enforcement proceedings can cost upwards of $30,000 or more. Furthermore, non-competition agreements are downright prohibited in some states. You may have heard or read that the Federal Trade Commission is considering a rule that would ban non-competition agreements. That potential rule that would ban non-competes was first introduced in January 2023, and the Administration has not shown an intent to enact such a ban before the 2024 election. Additionally, it is likely that if a rule relating to non-competition agreements is enacted, it will not apply to all licensed professionals or higher wage earners. Accordingly, non-competition agreements are still likely to exist in the veterinary industry, so informing potential candidates that your practice does not impose geographic non-competes will likely still be an attractive benefit.
What we can and should include, however, is a clause that prevents former employees from sharing proprietary information or using the practice’s client database for personal gain. Confidentiality, non-solicitation, and non-disparagement clauses are reasonable alternatives. Furthermore, if we keep employees happy, they won’t be tempted to work at the practice down the street!
Ultimately, whether or not you choose to incorporate a non-compete clause in your contracts, please take a minute to weigh the potential effect and determine if requiring a potentially moot, non-compete is really the message you want to convey.
Written by Meghan Bingham and Peter Tanella