April 9, 2013
Restrictive Covenant enforceable when terminate without cause?
I heard restrictive covenants are not enforceable when an employee is terminated without cause. Is this true?
Dr. S, there is a case decided a while back that did contain dicta indicating that a restrictive covenant would not necessarily be upheld if an employee were terminated for cause. Post v. Merrill Lynch, Pierce, Fenner & Smith, 48 N.Y.2d 84 (1979) The process behind that language was that when an employee is deprived benefits it would be unfair to also restrict their ability to work. However, this language did not establish a defined rule that restrictive covenants cannot be enforced when someone is terminated without cause, and subsequent cases have clearly held that an employee's restrictive covenant may be upheld even if the termination is by the employer without cause. The rationale behind a restrictive covenant is that so long as the provision is reasonable in time duration and geographic range, they may be upheld to protect a legitimate business interest of the employer.
So, just because an employee may be departing a position without cause and at the employer's determination, this does not necessarily result in the restrictive covenant being unenforceable. Lesson to be learned - do not sign a restriction that may significantly adversely impact you.
Enforcing ethical obligation
Last week you wrote on an employer's obligation to provide contact information to patients if you leave a practice. What if the employer does not comply?
Dr. J, good question, and the answer is where an ethical obligation exists unless there is also a legal obligation the potential exposure for noncompliance would be potential inquiry or report to licensure (OPMC or OPD, depending on the licensee). In a situation where the obligation is providing forwarding information, failing to do so would likely only come to the attention of an authority by complaint.
An additional authority that may be interested in such activity could be an accrediting organization responsible for "licensing" or "accrediting" a facility or practice.