Enforceability of Restrictive Covenants in the Dental Field
A dentist and manager of several dental practices recently posed this question to this writer: “Aren’t restrictive covenants not enforceable in Massachusetts for dental practices?” Restrictive covenants, which often are written into associate agreements to prevent a dentist from practicing dentistry within a certain geographical distance from his present practice for a certain period of time, are not enforceable in Massachusetts for physicians, but are in many cases for dentists. By statute, Massachusetts bans restrictive covenants applicable to physicians, based on the reasoning that it is a strong public interest that patients be allowed to see a physician of their choice. While one might argue that dentists too, as professional providers of a medical service, have enough of a personal relationship with their patients to warrant the same kind of protection as physicians as far as restrictive covenants are concerned, the legislature and courts have determined that this statute must be strictly construed, and a “physician” is not a “dentist” insofar as the enforceability of restrictive covenants.
Of course, some protection does exist for dentists to allow them to make agreements with restrictions on practice area and duration of the provision for associates practicing dentistry after they leave the dental office. The standard commonly used in Massachusetts as well as in other states is whether the restrictive covenant is “reasonable.”
So what is a “reasonable” restrictive covenant, or “covenant not to compete” in an associate’s contract that protects a dental practice owner from an associate setting up his or her own practice sometime soon after leaving that practice? The main considerations by the courts in allowing restrictive covenants to be enforced are whether they are reasonable in geographic scope and duration. A geographical area restriction prohibiting by contract an associate dentist from practicing within five or ten miles of the practice location may be enforceable, but may be unreasonable if it is wider than that. Additionally, the duration of a provision of the noncompetition agreement may be allowed if it is for three years but not allowed if it is for five years.
Other factors that courts consider when enforcing restrictive covenants are whether there are clauses prohibiting dentists from contacting patients of the practice or using patient lists at all in continuing to practice. Not only is this kind of provision usually upheld, but privacy laws may restrict health and other information about patients from being transferred to a new practice. Additionally clauses preventing solicitation of employees of the practice for a certain time period are very often enforceable. The owner of a practice that has built up both patient and employee relationships over a period of time is thus protected if an associate leaves the practice to practice dentistry in his or her own office or for another dental office.
The courts often look at the particular circumstances of how a provision is breached in order to enforce it. If an associate is fired just before the duration restriction is set to expire to take advantage of the provision’s exact language, it may not be enforced. Likewise, if an associate tries to purposely cause a termination in order to avoid the restriction, that same court may enforce the provision against the terminated dentist.
There are possibilities for associate dentists or even partners in a practice to create a restrictive covenant that is partial in nature-that is, allows for particular damages or compensation for any particular breaches of the covenant not to compete. This allows the younger associate to further advance in his or her career in a shorter period of time if an opportunity arises.
Because of the variability of decisions regarding the enforceability of restrictive covenants in dental associate agreements, and their subjective nature, it is wise, and recommended by the ADA, to have an attorney write the provision and suggest alternatives that fulfill the wishes of both parties.