DOCTORS AND NON-COMPETES: CASE #8

The City of Norfolk Circuit Court provides the next physician non-compete case of interest. The case, Denton Weiss v. E.V.M.S Academic Physicians and Surgeons Health Services Foundation, was decided in 2005.

Dr. Weiss and EVMS entered into an employment agreement which contained a non-compete provision. Problems arose in the employer-employee relationship and Dr. Weiss asserted that EVMS had failed to meet its obligations under the employment/non-competition agreement. Dr. Weiss, while still employed by EVMS, filed suit against his employer asserting what is called the "First Breach Defense" in his attempt to void the non-compete provision of his contract. This defense basically asserts that if an employer first breaches its obligations and duties to the employee under the employment agreement, then the employer is not permitted to hold the employee to his/her obligations under the agreement. This is also sometimes referred to as the "clean hands defense" to non-compete contracts.

Great strategy by Dr. Weiss and his legal team...only one problem. The employment/non-competition agreement contained the following language:

The existence of any claim or cause of action of the Clinician [Dr. Weiss] against EVMS and the Foundation, whether predicated on this Contract or not, shall not constitute a defense to the enforcement by EVMS and the Foundation of the restrictions, covenants and agreements contained herein.

Basically, EVMS took away the first breach or cleans hands defense by inserting language in the employment/non-compete agreement allowing them to do so. The court found that inserting this "no defense clause" into the contract was not unconscionable or in violation of public policy.

My Take:Make certain you read all of the contract and discuss its meaning and impact with an attorney experienced in these matters.

DOCTORS AND NON-COMPETES: CASE #1

One of the first reported (and important) cases involving doctors and non-compete contracts arose in Richlands, Virginia, a town in Tazewell County. The case, Clinch Valley Physicians, Inc. v. Luis Garcia, MD, was decided by the Virginia Supreme Court in 1992.

Clinch Valley Physicians, Inc. (CVP) was a professional corporation whose shareholders were physicians. Each physician had a contract with CVP which provided, among other things, as follows:

1. The contract term was for one year but could be automatically renewed.

2. The Board of Directors of CVP could terminate the contract for justifiable cause, which included, but was not limited to any of the following: (a) the withdrawal or suspension of the license to practice medicine and/or surgery in Virginia; (b) the withdrawal or suspension of the license to dispense or prescribe narcotic drugs; (c) being guilty of professional misconduct by any professional organization having jurisdiction; (d) the withholding of any professional or other fees in breach of the terms and provisions of this agreement; and (e) failure to observe the general rules promulgated by the Board of Directors of CVP.

3. Upon termination of the agreement, for any reasons whatsoever, the Physician could not, for a period of 3 years, engage in the practice of medicine or surgery in a radius of 25 miles of Richlands.

Dr. Garcia decided to leave CVP and his contract was not renewed. He then filed suit against CVP asserting the non-compete language did not apply to him since his employment agreement with CVP had lapsed and he was not "terminated."

The Virginia Supreme Court agreed with Dr. Garcia's position and held the non-compete provision was not enforceable against him. The Court reasoned that, in reading the agreement in its entirety, the non-compete provision applied only to physicians who were "terminated" as set forth in the agreement.

The importance of this decision is that it is a great example of how the court looks very closely at the precise language of the agreement and, if it is unclear or ambiguous, such flaws will be held against the employer who drafted the agreement. The Court noted that CVP could have drafted the agreement so that it would have applied in situations where the physician chose not to renew his contract.

DOCTORS AND NON-COMPETES: CASE #4

The next important decision ruling upon the legality of non-compete contracts with doctors and physicians comes from a decision by the Warren County (VA) Circuit Court. The case was Shenandoah Chiropractic, Inc. v. Scott Berman, decided in 1996. In some respects this case follows the ruling of the Virginia Supreme Court in Clinch Valley Physicians v. Garcia which I discussed several days ago.

Shenandoah Chiropractic was a Virginia corporation engaged in the practice of chiropractic medicine in Front Royal, Virginia. In December of 1994, Shenandoah Chiropractic and the the defendant (Berman, a chiropractor) entered into an employment contract. The relevant portions of the contract provided as follows:

…the employee further agrees not to transmit or reveal any information, written or oral, concerning the patients of the employer, its methods of operation or business forms to a competitor or prospective competitor nor use any such information for himself or others in the same or similar employment . . .

In the event that the employee terminates the employment agreement, for a period of one year from the date of such termination that the employee shall not engage in the business of the evaluation and non-surgical treatment of musculoskeletal disorders, the rehabilitation of musculoskeletal disorders, nor act in aid of such business, within a forty (40) mile radius of the center of Front Royal, Virginia, or any other clinic owned or operated by employer…

The twist with this case arose out of the fact the employment contract, by it terms, expired on June 4, 1996. The parties negotiated before and after the expiration date but were unable to agree to the terms of a new employment agreement. After the negotiations failed, Berman left Shenandoah Chiropractic and opened an independent chiropractic office in Front Royal, VA. Shenandoah Chiropractic then filed suit to enjoin Berman from operating his office.

The court denied Shenandoah Chiropractic's request for an injunction, finding the employment agreement "expired" on June 4, 1996 and the non-compete limitations expired with the agreement. The court noted that Shenandoah Chiropractic could have written the employment agreement such that the one year non-compete would also run from the expiration of the contract but failed to do so.

PHYSICIANS/DOCTORS AND NON-COMPETES

The law in Virginia disfavors non-compete contracts...but that general rule doesn't mean a court will refuse to uphold and enforce such agreements...each situation is different...and each profession or job situation is different.

I hope to spend some time over the next few days or weeks discussing what Virginia courts have had to say about non-compete agreements and doctors...when are they enforced and when are they determined to be oppressive and invalid.

I will start by sharing with our readers what the American Medical Association has to say about non-competes. In short, the AMA discourages the use of non-competes:

E-9.02 Restrictive Covenants and the Practice of Medicine

Covenants-not-to-compete restrict competition, disrupt continuity of care, and potentially deprive the public of medical services. The Council on Ethical and Judicial Affairs discourages any agreement which restricts the right of a physician to practice medicine for a specified period of time or in a specified area upon termination of an employment, partnership, or corporate agreement. Restrictive covenants are unethical if they are excessive in geographic scope or duration in the circumstances presented, or if they fail to make reasonable accommodation of patients’ choice of physician.

My Question: Why don't courts cite the AMA's position in reviewing and deciding upon non-compete contracts involving doctors?

READ BEFORE YOU BUY - HOW TO BEAT YOUR VIRGINIA NON-COMPETE

Dan has published a how to guide for Virginia Employees, HOW TO BEAT YOUR VIRGINIA NON-COMPETE.

Want to read before you "buy" your free copy?

Introduction and Chapter 1 are available for print or download on our website - www.frithlawfirm.com.

DON'T SIGN AWAY YOUR FUTURE

We closely follow cases throughout the Unites States which deal with non-competition disputes. We also follow what is being written and discussed in the newspapers, and the academic and trade journals.

I just read an article in ComputerWorld which discusses non-compete agreements in the information technology sector and recommend it highly.

Here is the link for the non-compete article in ComputerWorld.

EMPLOYMENT LAWYERS IN VIRGINIA

Need an employment attorney in Virginia? How do you know if you need an attorney?
-

Do you have an employment agreement / contract?
- Are you thinking of leaving your job?
- Did they ask you to leave your job?
- Do you want to stay in the same area?
- Is your new employer asking if you have a non-compete?
- Is your new employer asking you to sign a non-compete?

If you answered yes to any of those questions, you may need an employment lawyer who knows how to assist you with your Employment Agreements.

We can assist in reviewing your contract over the phone and email. If you need litigation support, we will be there too.

We are actively reviewing contracts and or handling litigation over employment contracts in the following Virginia counties: ROANOKE / RICHMOND / LOUDOUN / FAIRFAX / ARLINGTON / HENRICO / and more.

Please call us today or go to our NEW WEBSITE ON BUSINESS LITIGATION

"SHH DON'T TELL"

I was spending EASTER with family and overheard one of my brother's colleagues tell another person "Hey, did you hear? ___ (INSERT NAME HERE) got a job over at the ACME company. Don't tell anyone though - he is worried about his non-compete."

The "SHH don't tell" clearly didn't work. Here I am, a potential customer at Business 1, hearing intimate details about an old employee. If I heard it, I am sure the boss will over hear it too...Now aside from the fact you don't want customers to hear that, you don't want ANYONE to hear that.

Now thankfully I am not licensed in that state so I can provide commentary without any chance of the Not so secretive employee from calling my office when he gets sued.

But really guys - do you think that kind of information won't be shared? It will - sooner or later. So be careful with that type of information.

STEALING BUSINESS SECRETS!

Our firm spends a great deal of time representing employees who are fighting restrictive and unfair non-competition or non-compete contracts. We are also involved with employment litigation involving allegations of the theft of trade or business secrets.

Virginia has adopted the Uniform Trade Secrets Act which defines a "trade secret" as:

...information, including but not limited to, a formula, pattern, compilation, program, device, method, technique, or process, that:

1. Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use, and

2. Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy.

Recently, a lawsuit was filed in New York with interesting allegations over the theft of trade secrets. In the suit, Starwood Hotels & Resorts Worldwide Inc. is claiming Hilton Hotels Corp. and two of its executives stole secrets about Starwood's luxury brands.

Starwood alleges that two former Starwood employees stole more than 100,000 electronic files before and after they joined Hilton Hotels Corp. in June 2008. The lawsuit claims that confidential information about Starwood's W hotel brand was used to help Hilton develop its Denizen brand, which was formally launched in March.

We will do our best to follow this trial as it progresses as it should be an entertaining discussion of just what is a "trade secret" and what is required to prove the trade secret has been misappropriated by a departing employee.

DON"T ASSUME ANYTHING

Please don't assume the following:

1. You didn't sign a non compete

2. If you did sign a non compete, your boss would have given you a copy

3. Your boss won't enforce a non-compete

4. You aren't in breach of your non-compete

5. They can only enforce your non-compete in a year

6. If your friend left and wasn't sued, don't assume you won't be sued.

PLEASE CALL AN ATTORNEY before you assume any of the above.
Most of our non-compete litigation begins with one of the above misconceptions!

Better to be prepared.

STARTING A NEW JOB? DON'T SIGN THE NON-COMPETE

Today's economy places many at risk for unemployment. However, things will get better. Many economic forecasters believe America will see a new wave of innovation and growth arise from these turbulent times. Those workers fired....furloughed...and downsized will start their own business and become economically successful!

My warning goes to those individuals who lose their current job and are asked to sign a non-compete before working at their new job. If there is anyway to prevent it...DO NOT SIGN A NONCOMPETE.

Don't limit your opportunities. Don't sign away your economic future.

FREE BOOK ON VIRGINIA NON-C0MPETE LAW

We are happy to announce the completion of our new book, "How to Beat your Virginia Non-Compete." As the readers of this blog know, Lauren and I spend a great deal of our time representing employees faced with illegal and unfair non-compete and non-solicitation employment agreements. This book pulls together, in a very readable manner, the issues which every employee must consider when faced with a non-compete agreement.

The book provides a great discussion on what Virginia law says about non-compete employment contracts and explains what employees must do to protect his or her present interests, as well as their ability to earn a future livelihood. The book includes a "must read" discussion on:

1. The Dirty Dozen: Twelve Important Non-Compete Cases in Virginia; and

2. The Ten Biggest Mistakes Made by Employees.

Best of all....the book is FREE to any Virginia resident. You can obtain your free copy of the book by calling Gail at our office (540.985.0098) and provide her with a Virginia mailing address and your email address. This offer is for Virginia employees only.

WHAT ADVICE LAWYERS ARE GIVING TO YOUR EMPLOYER

We subscribe to many publications - including a local one written for the Business community in our region.

In a recent article, an attorney who primarily advises employers in employment situations gave the following advice when employees leave:

(Yes - I am paraphrasing)
- Contact the IT department to find out whether that employee has downloaded documents recently
- Cut off their computer access ASAP
- Get the laptop back

The attorney adds "be prepared."

Well, we advise EMPLOYEES... and my advice is the same. Be prepared, but don't break the rules. This morning I wrote about planning your exit.

Act as if everything you say in confidence to a co-worker, and type on your computer, even in a private email, will end up in front of a judge someday.

Don't take documents, give everything back (and a list of what you returned in writing), be nice, don't make threats to file suit, don't copy files or customer lists.... BE SMART.

After all, your employers are being told you contact IT the minute you are out the door. Let them, and they will realize you have done nothing wrong.

STARTING A NEW BUSINESS

By all accounts, this bad economy is a good time to start a new business. Maybe not leave your job to go solo - but file the paperwork with the state, form an LLC - "plan ahead."

There may be a problem with being so organized thought.

Do you have a non-compete? Do you work for the type of place that might file suit to enforce that non compete?

Well - here is how your organization may look terrible when litigation begins:

Q: "Mr. Smith - now you planned on leaving Virginia Corp and competing years ago, didn't you?"

A: "No - I loved my job. I didn't plan on leaving at all - the recession was so bad they let me go."

Q: "But Mr. Smith - you don't expect me to believe that when you formed an LLC, got a Tax ID, posted a profile on Linked In in 2008-2009?"

A: "I was just planting seeds - just in case. I have to take care of my family."

YIKES. This scenerio doesn't make you look so great. If you need help in deciding what to do, we will help. We can review your non-compete and discuss what options you have.

It is important to be prepared, but, with employment contracts, sometimes being prepared can make you look bad!