Should Covenants Not To Compete Be A Part Of Your Practice?
By: Rob J. Crichton
Washington courts recognize noncompetition agreements, also known as covenants not to compete, as a legitimate tool of an employer to protect against competition -- provided that they are reasonable. Serious consideration should be given to their use in connection with a dental practice. Imagine spending several years patiently training and nurturing the career of an associate dentist in your office, with the idea that he or she will one day purchase your practice. Then picture that dentist leaving your employ and opening a profitable practice right next door. Such a scenario can be avoided with the use of a noncompetition agreement as a condition of employment.
In determining whether noncompetition agreements are enforceable, Washington courts consider whether the restraint is reasonably necessary for the protection of the employer's business or its goodwill; whether the covenant imposes upon the employee a restraint that is greater than is reasonably necessary; and whether enforcement of the covenant will injure the public as a result of the loss of the employee's services and skill so as to warrant nonenforcement. As a practical matter, the courts generally will enforce a noncompetition agreement governing the practice of dentistry so long as (1) there has been consideration (something of value such as the employee's hiring) given in exchange for it; (2) it is reasonably limited in geographic scope; and (3) it is for a reasonable period.
Typically, a noncompetition agreement will seek to restrict an associate dentist's ability to practice within a certain number of miles of the practice, such as a five mile radius, or within a particular community. Thus, for example, a dentist in downtown Seattle could reasonably prevent an associate from practicing elsewhere in the downtown area for several years, while the associate would be free to practice in, say, Bellevue. The courts will not recognize unduly oppressive terms, such as a covenant barring a dentist from practicing anywhere in western Washington, because a clause this extreme would be viewed as punitive in nature and not reasonably necessary for the employer's protection.
Such agreements normally provide that injunctive relief may be granted to enforce their terms. The courts will often enforce those provisions. The ability to shut down a former employee's practice is a significant deterrent. In addition, provided that the agreement provides for an award of attorneys' fees and costs to the prevailing party, one may also recoup their reasonable fees and costs in enforcing a noncompetition agreement.
This article is only intended to provide a brief, general summary of the law applicable to covenants not to compete for informational purposes. We invite you to consult with Scott Henderson about how you might avail yourself of a noncompetition agreement in your practice.
