A locum tenens doctor wrote the following e-mail requesting advice regarding a restrictive covenant in her locum tenens contract:

I was offered a part-time contract through [a regional hospital system]. Their lawyers have stated the contract between the hospital system and [the locum tenens staffing company] is one year for the provider. I had a lawyer review my contract with the staffing company and the restrictive covenant says that it is two years. I was wondering what the discrepancy means because I would like to start working as an employee for the hospital system next month [which was about 15 months from the last time the physician worked at the hospital]. Can I get in trouble with the staffing company for this? I do not want to end up owing them money for a buyout.

Pertinent language from the physician’s contract stated:

During the term of this Agreement and for a period of 2 years after its termination or expiration, Physician agrees to a) immediately notify [COMPANY] if Physician accepts a temporary or permanent position with any Client for whom Physician performed, or was introduced to peform, Services; b) not provide locum tenens services to clients for whom Physician performed, or was introduced to perform, Services unless such locum tenens services are furnished through CompHealth; and c) not directly compete with Client’s practice.

Pertinent language from the contract between the locum tenens staffing company and the hospital system stated:

Presentation to Client. Presentation of a Provider candidate will be specific to a particular Client for a period of twelve months from the date they were presented or last date worked for a Client. Presentation of a Provider candidate to a specific [HOSPITAL] Client shall not be deemed a presentation to any other [HOSPITAL] Client.

What Is A Restrictive Covenant?

Three basic forms of restrictive covenants are typically contained in employment agreements: “non-compete agreements,” “non-interference clauses,” and “non-solicitation clauses.”

Non-competition Agreements

These clauses are designed to prevent a physician from leaving a group or hospital that introduced them to a patient base, setting up a clinical practice across the street, and taking a large portion of the employer’s patient base with them. A non-compete clause is more applicable to private practice office settings as the clauses prevent a physician from competing in the same market with the current employer in a particular geographic area for a specific period of time following termination of the employment contract. However, non-compete agreements can apply to locum tenens physicians. Locum tenens staffing agencies invest a significant amount of resources finding and screening providers for locum tenens opportunities. If a hospital simply hired desirable locum tenens doctors that were presented to the hospital, the staffing agencies would lose out on their investment. Therefore, staffing agencies generally have non-compete agreements with both the hospital and with the providers to prevent such a scenario.

Non-interference Clauses

This language prevents physicians from interfering with the business relationships of the agency or the hospital both during the contract and after the locum tenens agreement has ended. For example, a non-interference clause may prevent a physician from telling an insurer or a company not to do business with the hospital or it may prevent a physician from telling a hospital that the staffing company is poorly run and that the hospital should hire another company.

Non-solicitation Agreements

A non-solicitation agreement prevents a physician from encouraging staff members of a hospital or a staffing company to quit and accept a job with  once the physician leaves. A non-solicitation clause may also prohibit physicians – either singularly or as a representative of a group – from offering to perform similar services for a hospital in an attempt to oust the current staffing company.

Restrictive covenants must have reasonable scope and time restrictions. A locum tenens physician should not agree to more than a 2 year non compete clause after providing notice of termination of the locum tenens agreement. Generally, a 1 year non-compete clause should be sufficient to protect a locum tenens staffing company’s business interests.

Contracts involving locum tenens providers often allow a hospital to “buyout” the restrictive covenant. For example, if a hospital wishes to hire a staffing agency’s physician, the hospital would be able to pay the staffing agency a large amount of money to release the physician from the non-compete provision. Unfortunately, the buyouts often amount to $30,000 or more, which often makes them prohibitively expensive.

How should a locum tenens physician manage a restrictive covenant?

The non-compete provision between the staffing company and the hospital is sometimes called a “reverse restrictive covenant.” Because physicians don’t see the contracts between the staffing companies and the hospitals, the physicians typically don’t even realize that such covenants exist. In this case, even if the physician’s contract had no noncompete clause, the hospital would be contractually prevented from hiring the physician for 12 months after the last date that the provider worked for the hospital.

However the contract that the physician has with the staffing company (which has completely different terms) contains a 2 year non-compete clause, meaning that the physician would have to wait 2 years after terminating her agreement with the staffing company before accepting an employment opportunity with the hospital.

If the physician accepted a permanent position with the hospital 15 months after last working at the hospital, the hospital would not be in violation of its one-year non-compete agreement with the staffing company, but the physician would be violation of her two-year non-compete agreement with the staffing company.

The only options for the physician are to wait for two years after terminating her agreement with the staffing company or to negotiate a buyout with the staffing company so that she can begin working at the hospital sooner. While the physician may be tempted to accept a position at the hospital without notifying the staffing company, if the company later discovered the contract breach, it could sue the physician for substantial damages.

BAM Medical Staffing has reasonable restrictive covenants and buyout fees that are less than half of the industry average. Want to learn more? Contact us!