Contractual covenants restricting employees’ post-employment activity are generally disfavored by courts and are only enforced in New York if they are found to be "reasonable." These covenants not only limit competition, to the detriment of customers, but they inhibit the employee’s ability to engage in his or her chosen trade or profession. Where restrictive covenants are contained in physicians’ employment or partnership agreements, however, additional policy considerations are implicated, potentially subjecting such covenants to even higher judicial scrutiny. Attorneys drafting or reviewing restrictive covenants involving the practice of medicine should be aware of the unique issues at play where those restrictive covenants become subject to court review.
No Per Se Rule for Physicians
In New York, as well as elsewhere, there is a largely unjustified disparity between how courts treat covenants restricting practice among attorneys as compared to covenants restricting physician practices. Covenants restricting an attorney’s practice are deemed by New York courts to be per se invalid and unenforceable.1 Several states have statutorily prohibited covenants restricting a physician’s ability to practice, or provide that only monetary but not injunctive relief is available for breach of such covenants.2 New York, however, has historically enforced these covenants.3 Examination of the policies behind the rule applied to attorneys reveals that such policies arguably apply equally, if not with greater force, to restrictive covenants involving physicians.
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