BLOG: More restrictive covenants
Click Here to Manage Email Alerts
Key takeaways:
- Non-solicits and no-hires are designed to protect the practice after a sale.
- It is important to protect patients’ rights to continuing treatment.
We’ve discussed non-compete restrictions and possible exceptions in our previous blog entries. In addition to non-competes, you can expect that the buyer of your practice will also expect you to agree to non-solicits and no-hires.
Non-solicitation restrictions, or non-solicits, are contractual obligations that restrict you — on behalf of anyone other than your practice — from soliciting and poaching people and companies that have a business relationship with your practice, such as patients, referral sources, vendors, employees and independent contractors. Similarly, no-hire restrictions prohibit you — on behalf of anyone other than your practice — from hiring or engaging employees or independent contractors of the practice.
Image: Adobe Stock
A buyer of your practice, including a private equity partner, is likely to ask for at least two non-solicits and no-hires: one that is tied to the sale of your practice assets, which will run for a fixed period of a few years from the closing of the sale, and one that is tied to your ongoing employment with the practice and possibly for a couple years after termination of your employment.
Similar to the purpose of a non-compete, non-solicits and no-hires are designed to protect the practice after the closing of the sale, primarily in the event that you leave the practice. Let’s say there is a particular physician, practice administrator or supplier that is critical to the practice’s business — buyers understandably will want to retain these persons to continue to drive the business forward, including by restricting you from poaching or hiring these persons away from the practice.
You can negotiate for certain permitted exceptions. The least controversial exception is allowing you to advertise job postings for open positions without specifically targeting the practice, but buyers may still want to restrict you from actually hiring anyone from the practice who responds to these job postings. You might want to consider negotiating for other more nuanced exceptions, such as being free to hire former employees who left the practice at least 6 months prior.
Lastly, no one should be able to dictate to a patient where they can receive treatment — you may want to make it crystal clear in any agreement with a buyer that your treating former practice patients after your departure from the practice will not violate the non-solicit. It’s not only good practice to protect patients’ rights to continue treatment from you — in most states, honoring patients’ rights is a requirement under licensure regulations.
Seasoned lawyers can help you understand the scope of the non-solicit and no-hire and negotiate for certain exceptions, depending on what is most important for you.
Collapse
Read more about
Click Here to Manage Email Alerts